Let the dogs out

Friday was the last day to sell a security, have it settle and be able to claim a loss again gains. If you weren’t aware losses could be deducted from profits in order to reduce taxes, well, now you do. If fact, it gets even better…

Losses (usually from dog stocks your idiot BIL told you were ‘sure things’) can be carried back three years and applied against taxable wins – so taxes paid in 2017 or 2016 could be reclaimed. As well, capital losses in Canada can be carried forward indefinitely, then used to offset past or future capital gains. Sweet.

This ability to creatively use losses is a powerful argument for dumping any of the crap investments you’ve been nursing along for years. I’m constantly running into people (usually men) who can’t bear to sell something for less than they paid – so they hang on to the pooches for an agonizing period of time, during which there’s at least a 50% chance things will get worse. It’s a guy thing. If you eventually break even it’s like the bad decision never happened. Virginal once again!

Of course, it’s been hard to find losing securities in 2019. Unless it was one of the weed stocks, like Aurora. That bow-wow was sitting at close to $14 in March, now finishing the year at $2.60 – a plunge of 80%. The entire cannabis sector has been a boneyard of failed expectations, more evidence buying individual stocks is a hedonistic gamble and speculating on new and unproven companies can be financial suicide. The looming vaping crisis and the destructive potential of edibles could bring a lot more heartache to those who bought into Justin’s failed social experiment.

Despite the weed debacle, Bay Street ends 2019 on its own high. The TSX has gained 20% (plus dividends), and sits 25% above where it was a year ago – during the Santa Slaughter. That’s when my suspender-snapping, Porsche-driving, bowtied, omniscient, stones-of-steel portfolio manager colleagues moved to increase their weighting in stuff like a low-vol Canadian equity ETF that’s steadily gained all year, now ahead 22%. It’s a timeless lesson. In a storm you buy, never sell.

So here we are staring into 2020. US markets have soared about 30% despite trade wars, Boeing and impeachment. The coming year will bring a US presidential election (markets think Trump will take it), probably more trade agreements, plus enhanced global growth, inflation and even higher interest rates. All that’s good, given the fact it’s already the longest period of economic expansion in modern history. You will remember that 12 months ago the headlines were all doomy as bond yields inverted and everyone hunkered down for a recession.

It didn’t come. Now with robust corporate profits, the lowest US jobless rate in history, an easing of the China trade tensions and Brexit coming to a conclusion, things look kinda peachy. So stay invested.

But wait. Isn’t it a lot more likely, with markets so high, we could have a correction if a surprise comes along?

Yes it is. After gains of 20% or 30% investors could be tempted to take risk off the table if they see things heading south, even temporarily. If Trump loses in November, if the China deal blows up, if the Senate waffles on the impeachment trial, if Hong Kong is invaded or a string of climate-related disasters threaten global growth, expect consequences.

How much? How long?

A few pullbacks (a drop of 5%) should be absolutely expected. A correction or two (declines of 10%) are entirely possible. Remember that two-thirds of the time a drop of that size does not foreshadow the coming of a bear market (a plop of 20% or more) and even if a bear arrives, it can depart fast (as happened exactly a year ago). The most important thing to remember is to park your emotions and resist the temptation to bail when the numbers turn red. Of course, you should also have a balanced approach to investing. No equity-only portfolio. No individual stocks. Forty per cent fixed-income assets (bonds, preferreds). Diversification (use ETFs, have some REITs, not too much maple etc). And be tax-smart, putting boring bonds in an RRSP,  growthy stuff in your TFSA and dividend-producers in the non-reg account).

So declines are a fact of life. But remember 70% of the time markets advance. Thus never be too fearful, nor too greedy. If you end up with a cur of a security – the result of an emotional mistake – dump it. Unlike ex-spouses they’re good for something beyond regret.

 

51 comments ↓

#1 WUL on 12.27.19 at 1:12 pm

From the Great Plains out West, a sincere wish to the greats at Turner Investments, Dorothy, Bandit and all the kennel inhabitants here, that 2020 clear vision allows all of you to reach a healthy, happy and warm space.

Cheers and see y’all down the trail,

WUL

P.S. – Flames vs. Oil tonight.

#2 MF on 12.27.19 at 1:17 pm

#33 T on 12.26.19 at 11:28 pm

Not wrong. There’s more to life than real estate and debt. The positives out weigh the negatives in Canada. I’m not in debt. People just make bad choices.

We actually agree.

MF

#3 WUL on 12.27.19 at 1:31 pm

A harbinger.

My second FIRST! May 1, 2016 was my first FIRST!. The day the Horse River Wildfire bore down to rain destruction on Fort Mac.

Now, a sign that the Flames (note: – fire reference) will finish first.

Tonight Milan Lucic (Flames) dominates James Neal (Oil). Only over $11MM total salaries between the two ponderous has beens.

Bless ya Turner,

WUL

#4 Dogman01 on 12.27.19 at 1:51 pm

Canada – it is like watching a really bright young person whom has a lot of opportunity settling on being an Uber Driver.

Canada
– does not seem to have an industrial strategy, at all.
– Decides one of the industries it is a leader in, Oil & Gas, is just too dirty to retain (regardless that world Oil and Gas consumption will continue to rise for the next 30 years)
– Shrugs its shoulder …meh and let’s go industries where it has leadership, Avro Arrow (Aerospace), Nortel (telecommunications) , Blackberry (mobile phones for god’s sake)

I have always wondered in Alberta, why our local leaders are content to ship the lowest value add product instead of creating an industry and jobs here. (shoving diluted bitumen in a pipe instead of refining the stuff??).

Canada has a stable financial industry but that is economy supporting not economic activity creating.

As posters here yesterday noted, is the plan simply an immigration growth based housing construction economy and lending oodles of cash so the process can keep rising?

Or is their really no plan\strategy at all?

#5 tccontrarian on 12.27.19 at 2:38 pm

“So declines are a fact of life. But remember 70% of the time markets advance. Thus never be too fearful, nor too greedy.”

– – – – –

Better still (if you’ve got the stomach AND discipline):

“Be Fearful when others are Greedy, and be Greedy when others are Fearful” —- Warren Buffet

In my opinion, a +20% correction early in 2020 is in the cards. Why? Very little fear out there! Also the VIX has been making higher lows – as it’s done in the past prior to a major plunge.

tcc

#6 Theyounggreek on 12.27.19 at 2:51 pm

“Looming vaping crisis” and “destructive potential of edibles” lol spoken like an old bitter conservative. Where do you come up with this stuff? Less than 100 people have died from vaping!?!? Thats not a crisis. It is estimated 1 in 2 of us will get some form of cancer. That’s a crisis. As far as the destructive potential of edibles!?!? If you find laughing hysterically for 2 hours destructive then maybe you have a point. Hell, one could even find this blog funny on edibles. Conservatives are generally so dense that they still feel prohibition works. Let’s ask the people of Mexico how the prohibition of drugs in the good ole USA is working. That’s a crisis! The only way to curb the use of drugs is through education. Only by influencing the demand side of the equation can you make a dent against drug use.

#7 MEGA on 12.27.19 at 3:26 pm

The flames making Edmonton great again.

#8 Gregory on 12.27.19 at 3:37 pm

fall ! Rise! Fall! rIse! fAll ! Rise.. i am dizy

https://business.financialpost.com/real-estate/canadian-home-prices-fall-again-in-november-teranet

#9 IHCTD9 on 12.27.19 at 3:48 pm

It’s been a good year for sure, our portfolio is right now where I expected it to be next March. I suppose we’d better get ready for a pull back sometime soon. Or maybe not if Trump gets round two (likely)…

I gotta say, despite all the doomage being preached, this has been a great year. My public sector employed wife got a raise via increased funding from the Ford Cons, I got a raise too and work has been busy. Got nearly 16k in taxes back last spring, and the juicy CCB payments went up again shortly thereafter too. The Portfolio was put under new management in the spring and is doing great, not to mention the management fee is less than half with the new dudes.

Looking towards 2020, I anticipate another 15k+ tax return, and maybe another raise too if work stays good. There may be a shiny new truck in the driveway, and perhaps a new off road toy too. Our useless emergency fund is overflowing again too, so a liquidation is coming.

Can’t complain too much!

#10 Shawn Allen on 12.27.19 at 4:31 pm

Why doesn’t the government…

Dogman01 above said:

I have always wondered in Alberta, why our local leaders are content to ship the lowest value add product instead of creating an industry and jobs here. (shoving diluted bitumen in a pipe instead of refining the stuff??).

****************************
If by leaders you mean government, it is not their job. In a market economy that’s more your job than the government’s. Get on it.

By the way, Edmonton’s Refinery row says hello as does the brand new refinery in Redwater, the North West Refinery. And though it was not their job, the government did invest in that with certain help although it is not an owner. This is the first greenfield refinery built in Canada since 1984.

In a market economy, players are free to refine here or to pipe resources out. The province gets its royalty and then players are free to sell or refine. Do you favor banning pipelines (even moreso)?

#11 joblo on 12.27.19 at 4:44 pm

#4 Dogman01 on 12.27.19 at 1:51 pm

“I have always wondered in Alberta, why our local leaders are content to ship the lowest value add product instead of creating an industry and jobs here. (shoving diluted bitumen in a pipe instead of refining the stuff??). ”

Ever considered Kanada is and has been played by the US for decades?

Permian basin crushing western select?

#12 Keyboard Smasher on 12.27.19 at 4:50 pm

>Now with robust corporate profits, the lowest US jobless rate in history, an easing of the China trade tensions and Brexit coming to a conclusion, things look kinda peachy. So stay invested.

Valuations on the S&P500 are grossly inflated by fraudulent “value extraction” resulting from the most buyback activity in decades.

S&P 500 companies spent 97.9% of their operating earnings on share buyback programs and dividends in the last quarter with share buyback schemes equal 63% of this total.

So instead of reinvesting capital created by their business, they prefer to pump the share prices for themselves which is done primarily to boost compensation for management, who are rewarded phantom restricted shares, free of taxation.

I’m definitely NOT holding broad index ETFs…

Share buybacks increase shareholder equity. As an investor you should love that. – Garth

#13 Lost...but not leased on 12.27.19 at 5:28 pm

What’s the difference between weed stocks and Bre – X ?

Punchline = _______________________

What’s difference between weed stocks and Dot.Com bubble ?

Punchline = ___________________________

#14 TurnerNation on 12.27.19 at 5:28 pm

Good Evening Climate Changers. Then news for you I have is dire. 2020 is days away.
As per computer models the glaciers in this park will all be gone by 2020. (We are the enemy – it’s all mankind’s doing.)
Read all about it and GovernYourselfAccordingly:

https://i.redd.it/qznkaj3ka3741.jpg

#15 the Jaguar on 12.27.19 at 5:35 pm

@WUL
P.S. – Flames vs. Oil tonight.
and also,
#7 MEGA on 12.27.19 at 3:26 pm
The flames making Edmonton great again.

Nice to see discussion on Alberta center around something other than whining. Hockey will never hold a candle to baseball, but if it helps shake off some of the doom and gloom and keep hope alive for 2020 I am all for it. National Post article this morning indicating some investment funds returning to the ‘Patch’ from those disappointed in fracking numbers. It just may be the sound of Merlin engines starting up in the distance.

I get the biggest smile these days watching the television advertisements that McDonald’s is running for their love of ‘BEEF’ for their burgers, with cattle shown prancing around in the ads. It flies directly in the face of the A&W “Beyond Meat” advertisements. Who wants to eat one of those horrible sawdust plant based offerings when they can have the ‘real thing’?
Thank you McDonalds for supporting the Alberta Beef Industry.

#16 TurnerNation on 12.27.19 at 5:36 pm

2020 soon..the decade is over. Record stock markets and more. Read all about it:

https://www.spectator.co.uk/2019/12/weve-just-had-the-best-decade-in-human-history-seriously/

Don’t listen to the UN’s climate change death cult. Or do. Might as well our goverments do so

#17 Long-Time Lurker on 12.27.19 at 5:49 pm

I took a break from reading the comments section over the past few days. I feel almost human again!

Oh well, back to the Thunderdome.

#18 Long-Time Lurker on 12.27.19 at 5:51 pm

>Repo market clues.

>Super-long link below.

Fed accepts $28.80 bln at overnight repo operation

Dec 26 (Reuters) – The New York Federal Reserve on Thursday accepted all $28.80 billion in bids from primary dealers at an overnight repurchase agreement (repo) operation. For more details, see: here (Reporting By Karen Brettell Editing by Gareth Jones)

https://www.reuters.com/article/usa-bonds-repo/fed-accepts-28-80-bln-at-overnight-repo-operation-idUSL1N29007H

Fed May Be Quietly Masking Extent of Efforts to Calm Repo Market
Alexandra Harris
December 23, 2019

(Bloomberg) — Wall Street sleuths are wondering whether the Federal Reserve is quietly doing more to calm the U.S. repo market than just the headline-grabbing liquidity injections that have captivated observers for months.

The New York Fed runs something called the foreign reverse repo pool, a place where other nations’ central banks can park cash. The amount outstanding has shrunk by 18% since peaking at $306 billion in mid-September.

A reduction fits with the Fed’s goal of building up reserves in the banking system to keep the repo market orderly following the tumult of three months ago. Wrightson ICAP’s Lou Crandall and Bank of America strategist Mark Cabana suspect the Fed might be intentionally driving institutions away from the RRP program….

https://finance.yahoo.com/news/fed-may-quietly-masking-extent-171616740.html?guccounter=1&guce_referrer=aHR0cHM6Ly90LmNvL3lOQ296Q1NqSG8&guce_referrer_sig=AQAAAMVPhutP_9J0H7lUamjbBu83ZAy0pxy1_OIVedqR5l5ZLjgeg3BV85tEZBgObYgRDbFN3uO600EzOLC_nIF9adHo1CLXhNyYrs3zqw-MVxtzshcv7ElCTKb4cvQxKg3hhmhZJDbIDhVum7NY4oD5m5gTyAzgH6B5CnKFR9K7VQ7k

#19 Long-Time Lurker on 12.27.19 at 5:52 pm

>More repo market clues

Fed’s Repo Op Is Undersubscribed, Suggesting Dealers at Capacity
Alexandra Harris
December 26, 2019

(Bloomberg) — The Federal Reserve Bank of New York’s operation to inject cash into the financing system over the end of the year was undersubscribed on Thursday, a possible indication that dealer balance sheets are nearing capacity.

Primary dealers submitted $18 billion in bids for the Fed’s 14-day term repo operation, which matures Jan. 9. That was less than the $35 billion on offer and the third term operation aimed at year-end funding that has come in under the maximum amount. The Fed so far has injected roughly $203 billion and could offer as much as $260 billion more next week for the turn.

Providing sufficient liquidity for year-end is not simply a matter of the Fed offering enough repo, but also relies upon primary dealers transmitting it to the broader market, according to Jefferies money-market economist Thomas Simons….

https://ca.finance.yahoo.com/news/fed-repo-op-undersubscribed-suggesting-135004605.html?soc_src=social-sh&soc_trk=tw

New York Fed
Repo and Reverse Repo Operations

The New York Fed conducts repo and reverse repo operations each day as a means to help keep the federal funds rate in the target range set by the Federal Open Market Committee (FOMC). Operation results include all repo and reverse repo operations conducted, including small value exercises.

Operation Results for Friday, December 27, 2019
Last Updated: Friday, December 27, 2019 01:15 PM
Number of Operations Today: 2

Deal Date: Friday, December 27, 2019
Delivery Date: Friday, December 27, 2019
Maturity Date: Monday, December 30, 2019
Type of Operation: Reverse Repo
Auction Method: Fixed-Rate
Settlement: Same Day
Term of Operation – Calendar Days : 3 Days
Term of Operation – Business Days : 1 Day
Operation Close Time: 01:15 PM
Participating Counterparties: 3
Accepted Counterparties: 3….

https://apps.newyorkfed.org/markets/autorates/temp

#20 Linda on 12.27.19 at 5:53 pm

Keep calm & carry on:) May 2020 be happy & prosperous for all.

#21 Shawn Allen on 12.27.19 at 6:10 pm

Share Buy Backs and Tax Avoidance

Keyboard smasher at 11 complained:

S&P 500 companies spent 97.9% of their operating earnings on share buyback programs and dividends in the last quarter with share buyback schemes equal 63% of this total.

So instead of reinvesting capital created by their business, they prefer to pump the share prices for themselves which is done primarily to boost compensation for management, who are rewarded phantom restricted shares, free of taxation.

*************************
In theory massive share buy backs indicate that companies have no reasonably profitable expansion opportunities for the cash AND that they view the shares as under-valued. Buying back shares that are over-valued leads to trouble as garbage tends to float back to earth if you stop blowing on it. In a few cases for the S&P 500 that will be true. But in most cases the shares are undervalued at say 30 times earnings in a world where cash earns like 2%. (A 2% bond trades at 50 times its earnings).

The point about phantom restricted shares free of taxation may be quite valid. I believe these began to be issued when the law was changed to make options taxable upon issue. I am not sure about the laws in Canada and the U.S. but I do see companies where Directors have the choice to take their fees in restricted shares and they do defer if not avoid taxes.

It seems unfair when the staff get to pay taxes as they go and Director big shots can defer taxes like that on the money they earn as director fees.

#22 Yanniel on 12.27.19 at 6:24 pm

“ And be tax-smart, putting boring bonds in an RRSP, growthy stuff in your TFSA and dividend-producers in the non-reg account).”

A recurrent advise here that I struggle to understand. If the bonds are in the RRSP, how could one rotate money from bonds to equities upon rebalancing time without triggering a lofty taxation and forfeiting a chunk of your tax deferral capacity?

Why would you? – Garth

#23 Amok on 12.27.19 at 6:45 pm

What is the destructive potential of edibles?
Have you shorted weed stock, Mr. Turner? Is that why you’re trying to convince your readers (and perhaps yourself as well) that marijuana is the devil?
It’s so much healthier than alcohol.

Perhaps take a week off from writing this blog and try them out! They won’t destroy you I guarantee ;)
Happy New Year – thanks for the great (financial) advice!

#24 Xpat on 12.27.19 at 6:49 pm

#5 tccontrarian on 12.27.19 at 2:38 pm
“So declines are a fact of life. But remember 70% of the time markets advance. Thus never be too fearful, nor too greedy.”

– – – – –

Better still (if you’ve got the stomach AND discipline):

“Be Fearful when others are Greedy, and be Greedy when others are Fearful” —- Warren Buffet

In my opinion, a +20% correction early in 2020 is in the cards. Why? Very little fear out there! Also the VIX has been making higher lows – as it’s done in the past prior to a major plunge.

tcc

——
Tons of fear out there. Massive fund and ETF outflows in 2019.

Stocks climb a wall of worry.

The bull continues…

ETF assets in Canada are $200 billion, up 23.4% in 2019. – Garth

#25 leebow on 12.27.19 at 6:53 pm

That time of the year. Time to start preparing your report card for Mr. Bob Hamilton, the anti-Santa. But he is better than Santa. He gives you 20 days before adding you to the naughty list.

#26 Shawn Allen on 12.27.19 at 6:53 pm

Why not refine Bitumen in Alberta?

The North West Refinery is supposed to do just that, refining Bitumen into diesel, but has been instead refining crude oil into diesel as it struggles to get the first part of the process working to handle Bitumen.

The $9 billion refinery was also at least 50% or I think maybe more like 100% over budget.

The point is it is expensive and risky. That’s why there is not more refineries popping up and why the government has to be careful getting involved with tax dollars to try it. Easier said than done.

https://www.jwnenergy.com/article/2019/11/full-operations-sturgeon-refinery-pushed-early-2020/

#27 tccontrarian on 12.27.19 at 7:54 pm

#19 Linda on 12.27.19 at 5:53 pm

Keep calm & carry on:) May 2020 be happy & prosperous for all.
————-

Now that we have a Minister for Middle Class Prosperity to lean on, how can we not?

TCC

#28 Flop... on 12.27.19 at 7:55 pm

First night down here I counted sheep to try and sleep.

Didn’t sleep.

Now I count dolphins to help fall asleep.

Been sleeping like a baby dolphin since.

The six pack of beer each night might have something to do with it as well…

M45TX

Top 10 Data Visualizations of 2019.

The best visualizations are easy to understand, informative and eye catching. After combing through dozens of our articles on everything from the world’s economy, to the stock market and price changes, we picked the top 10 visualizations from 2019.

https://howmuch.net/articles/top-10-data-visualizations-2019

#29 Nonplused on 12.27.19 at 8:17 pm

#4 Dogman01

“I have always wondered in Alberta, why our local leaders are content to ship the lowest value add product instead of creating an industry and jobs here. (shoving diluted bitumen in a pipe instead of refining the stuff??).”

It’s because the refining centers and distribution networks already existed in the US before they started importing Canadian oil. Refineries almost always go near the market centers, not near the oil producing regions. (Texas is an exception but that is because it is both a producing and consuming region, and has sea access so it can ship products by barge. And many other exceptions exist like Denver.) You’ll see the same sort of thing with electric power stations, they go near or often in the cities, not thousands of miles away. They need less high voltage transmission lines that way.

There is also a second reason and that involves products. People assume that if we could refine the dilbit in Alberta and ship straight gasoline to the US we would be ahead, but gasoline isn’t the only thing that comes out of the distillation tower. Even after cracking you get tar out of the bottom of the tower, which is used to make roads, asphalt shingles, sealants, paraffins, etc. This stuff can’t be put in pipelines so we would have to ship it (probably by rail) to Texas and other points US.

We already upgrade a significant amount of oil sands production to synthetic crude, which is a very light oil. But there is only so much of that they want down south and it competes directly with shale oil, which they seem to have a lot of.

So, as always when looking at a complex system, there are usually reasons. You can’t just step up to a complex system and say “we should do it differently than how a multitude of engineers and economists set up the system over a generation” and think it will work.

Alberta, for example, has room for a lot of windmills. But Alberta will never be a “green energy” exporter. Why? It’s too far away from markets and thus the high voltage transmission lines would be too long. Windmills hardly make any sense at all (although they make more sense than solar which can’t work at night), but where they do make what sense they do is when they are close to the load, i.e. a city.

There are many cases where someone who only has a cursory understanding of how things work might be confused. For example product pipelines exist, the existing Trans-Mountain being an example. Most of the gasoline, diesel, and kerosene (jet fuel) consumed in Vancouver comes down it for example. Calgary does not have a refinery and is instead fed by product pipelines coming from the Edmonton area, as is Vancouver (economy of scale). But product pipelines are generally short compared to oil pipelines. Trans-Mountain may be one of the longer ones.

I am making a cautionary statement here regarding the hubris of assuming you know better than the thousands and thousands of highly educated people that were involved in the previous design and decisions: You probably don’t. Things are the way they are for reasons. They were well thought out, and suffered the razor blade of economics. Those ideas that failed went bankrupt and those that succeeded are with us today. Evolution and natural selection exists in the economic world as much as it does in the animal kingdom, only at a much much much faster pace.

There is a reason they put the road and bridge where they did. Yes, you have to snake down a curvy section, but a bridge going over the whole valley just isn’t worth building. Those road engineers weren’t idiots. They built the best possible solution that could be afforded.

#30 Shawn Allen on 12.27.19 at 8:25 pm

North West Refinery Woes

“At almost $190,000 per flowing barrel, the facility is by far the most expensive refinery every built.”

Did I mention this refinery was the brainchild of government?

#31 Richard Gibbons on 12.27.19 at 8:36 pm

If the bonds are in the RRSP, how could one rotate money from bonds to equities upon rebalancing time without triggering a lofty taxation and forfeiting a chunk of your tax deferral capacity?

Yanniel, one can buy equities in an RRSP. So, sell the bonds in the RRSP. Then buy equities in the RRSP. There’s no reason the money has to leave the RRSP and be subject to taxation. (Then later, when you have to rebalance the other direction, sell the equities in the RRSP to buy bonds.)

#32 Nonplused on 12.27.19 at 8:52 pm

The thing is Garth, we are facing somewhat uncharted territory, although your advice isn’t necessarily bad for dealing with it.

The biggest scale change that has happened over the last 20, or maybe 30 years, is that governments no longer equate spending with revenues. The spending has become an independent thing used for political purposes. Taxes have become an independent thing used to punish the successful. The reason for each, which used to be very closely related, well the tie is severed. Taxes are now a social justice thing, whereas spending is now an unconstrained boondoggle. We have to think about the future much differently than we thought about the past. The sun isn’t going to start going lower in the sky on June 22 anymore. In fact we are approaching an environment where the sun never sets and never rises. Real assets will still exist, but money and debt are not long for the world once winter sets in. That’s why housing prices are so high. Everybody knows your money is not worth more tomorrow than it is today, and it probably isn’t worth anything today. House prices are now a monetary phenomena.

Low interest rates and negative interest rates are simply an indication that money isn’t worth anything anymore and you should spend what you have now while you have the chance. The time value of money has been eliminated. Low or zero interest rates mean money has no value. The value of money in our current system is essentially what somebody will pay you to borrow it. That is now very close to zero. That means the value of money is close to zero.

Trading tip: Get rid of all the cash you can, and all bonds. When the populace realizes that cash is trash, the river will still be here and so will your house, your car, and your farm. But your cash won’t be.

#33 Yanniel on 12.27.19 at 8:56 pm

#21 Yanniel on 12.27.19 at 6:24 pm
“ And be tax-smart, putting boring bonds in an RRSP, growthy stuff in your TFSA and dividend-producers in the non-reg account).”

A recurrent advise here that I struggle to understand. If the bonds are in the RRSP, how could one rotate money from bonds to equities upon rebalancing time without triggering a lofty taxation and forfeiting a chunk of your tax deferral capacity?

Why would you? – Garth

If the fixed income portion of the portfolio increases beyond the desired allocation mix while the grows portion declines, then upon rebalancing we need to sell some bonds to replenish the risky assets. If the bonds are in the RRSP, while the stocks are in the TFSA/non-reg, then how can we rebalance without having to make an RRSP withdrawal?

#34 T on 12.27.19 at 9:00 pm

#2 MF on 12.27.19 at 1:17 pm
#33 T on 12.26.19 at 11:28 pm

Not wrong. There’s more to life than real estate and debt. The positives out weigh the negatives in Canada. I’m not in debt. People just make bad choices.

We actually agree.

MF

—–

We agree on much. Where we disagree is in this belief you have of Canada being some phenomenal country where everyone is happy and life is grand for all. This belief you have of life in Canada being better than what could be possible in any other country.

Reality is Canada is fine for many, great for a minority, but the majority are in great debt and despair and barely hanging on. Canadian systems are failing to provide for those who need it most.

#35 No stocks on 12.27.19 at 9:43 pm

Don’t buy stocks ? Just etfs ?
Will fortis, bce, trp, enb, ect… go under mr. turner?
I’m not talking about buying my bil’s hot stocks he heard in the patch or at the bar. Can someone please clarify?
Thanks
Barry

#36 Treasure Island CEO - 67,948,987.88 Offshore on 12.27.19 at 9:54 pm

I thought that the Canadian Yield Curve is still heavily inverted and the only one in the world that is?

Even though the measure is only one, where Australia has had 11 yield curve inversions in the past 9 years yet no recession.

#37 Yukon Elvis on 12.27.19 at 10:04 pm

#34 No stocks on 12.27.19 at 9:43 pm
Don’t buy stocks ? Just etfs ?
Will fortis, bce, trp, enb, ect… go under mr. turner?
I’m not talking about buying my bil’s hot stocks he heard in the patch or at the bar. Can someone please clarify?
Thanks
Barry
…………………….

Nothing wrong with our banks, telecoms, pipelines, and railroads. Especially the tsx top 60 dividend payers. Canada could not function without them. Safe investments, good dividends, good growth prospects. Buy the dips and hold, drip the divvies, you will do well.

#38 Sail Away on 12.27.19 at 10:24 pm

#34 No stocks on 12.27.19 at 9:43 pm

Don’t buy stocks ? Just etfs ?
Will fortis, bce, trp, enb, ect… go under mr. turner?
I’m not talking about buying my bil’s hot stocks he heard in the patch or at the bar. Can someone please clarify?
Thanks
Barry

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Barry, yes, it is indeed possible that those individual equities could go under, in contrast to the index, which will not.

Very few active managers can beat the index. Can you?

Try your hand at it if you want, but honestly track your returns vs the index to see if active management is worth your time.

#39 Chaddywack on 12.27.19 at 11:01 pm

“Justin’s failed social experiment.”

Couldn’t have said it better Garth. I’ve never understood the marijuana hype and I don’t get it now, but I do know a ton of people who have lost their shirts investing it in.

It’s never going to sell like or replace alcohol; I don’t care what anyone says, if nothing else it’s an image thing.

Sipping a merlot is so much classier than smoking a doob and it’s totally stereotyping, but the people I see smoking up (at least in public flaunting it in everyone’s face) either look hipster and broke or homeless and desperate.

I actually think pot to Canadians is like vodka was to Soviets. Justin’s political views are definitely on that end of the spectrum. Cheap vodka pleased the USSR and free weed will please Canada……or at least we will all be so high (first or second hand) that we won’t realize what a failure Trudeau is as a PM….

#40 SoggyShorts on 12.27.19 at 11:01 pm

#32 Yanniel on 12.27.19 at 8:56 pm
If you are still in the accumulation phase then your annual rebalancing shouldnt involve selling anything at all, just add to the “losers”.
In this case if you are actually trying to keep your RRSP in bonds then top up your TFSA Instead.

Personally I keep my RRSP in all USD for some currency exposure and then use it to buy US equity ETFs(VIG) directly and avoid paying any foreign withholding taxes.
BUT aside from a 10% REIT weighting I’m an all equity cowboy who should probably de-risk…

#41 Xpat on 12.27.19 at 11:32 pm

Tons of fear out there. Massive fund and ETF outflows in 2019.

Stocks climb a wall of worry.

The bull continues…

ETF assets in Canada are $200 billion, up 23.4% in 2019. – Garth

——-

Fair enough Garth!

I was referring to US Fund flows from the Lipper Fund Flow Report in the WSJ. Investors have pulled 135.5 billion from ETF’s and mutual funds this year, the largest on record.

I also think it’s tremendously bullish. That money has to flow back in at some point.

#42 Renter's Revenge! on 12.27.19 at 11:52 pm

#34 No stocks on 12.27.19 at 9:43 pm
Don’t buy stocks ? Just etfs ?
Will fortis, bce, trp, enb, ect… go under mr. turner?
I’m not talking about buying my bil’s hot stocks he heard in the patch or at the bar. Can someone please clarify?

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

They’ll be fine as long as your BIL doesn’t talk about them.

#43 Yanniel on 12.28.19 at 12:15 am

#30 Richard Gibbons on 12.27.19 at 8:36 pm
If the bonds are in the RRSP, how could one rotate money from bonds to equities upon rebalancing time without triggering a lofty taxation and forfeiting a chunk of your tax deferral capacity?

Yanniel, one can buy equities in an RRSP. So, sell the bonds in the RRSP. Then buy equities in the RRSP. There’s no reason the money has to leave the RRSP and be subject to taxation. (Then later, when you have to rebalance the other direction, sell the equities in the RRSP to buy bonds.)

——

Thanks RG. I get that (rrsp and tfsa) and non-registered accounts can contain both equities and bonds.

My dilemma is that by keeping bonds “only” in the RRSP you could not always rebalance your portfolio without an RRSP withdrawal. Whether it’s possible or not depends on the number of accounts, type of accounts, market value of the assets on each of the accounts at the time of rebalancing, the deviation (both in magnitud and direction) you have incurred in your allocation mix, etc.

A corner case example to illustrate my concern. Imagine an investor whose’s RRSP contribution room allows him/her to stash specifically 40% of his assets in the RRSP. Imagine this person uses a 60/40 split of stocks/bonds. If we follow the rule of bonds go to the RRSP, how can this person shift money from appreciating bonds (filling at capacity the RRSP) to depreciating equities at rebalancing time without triggering a taxable event?

This example I hand picked to illustrate my concern; but one can start thinking of other cases.

#44 Betelgeuse is gonna blow on 12.28.19 at 12:48 am

Look out….

#45 Loonie Coder on 12.28.19 at 12:53 am

#11 Keyboard Smasher on 12.27.19 at 4:50 pm
#20 Shawn Allen on 12.27.19 at 6:10 pm

Re: Phantom restricted shares defer/avoid taxes

——————————-

Please do elaborate. If you’re talking about restricted stock units (RSUs) which mirrors a company’s stock price but are not real (no voting, no dividends) shares – my understanding is they are paid out in cash, added to income and taxed at your marginal rate. I’m curious how taxes are deferred/avoided with RSUs.

#46 Ustabe on 12.28.19 at 3:42 am

I find it helps, when contemplating one’s taxation situation, to think of them as membership dues.

Some may be content to play the municipal course and pay the cost that entails. Others want to play the Jack Nicklaus designed course operated by a private club.

I recall being a member of the Cattleman’s in Calgary…even after I moved to BC yet kept my membership they still billed me a minimum usage fee above and beyond the annual dues.

Its pay to play all…no sense at all moaning about it.

#47 Westcdn on 12.28.19 at 7:28 am

I stay the course which is to disrespect cash hoarding. I am still fully invested in Canada and watching gold like a hawk and hunting down worthy preferred shares. I find keeping harder than getting. I like to say if I never made a mistake, I would be a billionaire years ago and coasting to being world emperor. In my world, what am I going to do with that? I thought I should clarify a few things regarding some of my recent comments.

My father and I both passed through a dominate testosterone period (late teens to early twenties). Neither one of us knew what it was doing to us. I went brain dead and turned into a lizard. My father spoiled for a fight. He fought in public and against numbers usually. He would fight for a women’s favour but never against them. They were the only thing that could make him run. My mother witnessed him clean out a bar of miners because they insulting to her – he used a chairs to help. Other guys I spoke with witnessed the same well past his thirties. His battle against an American naval shore detail in Halifax 1945 as told to me was a classic. The players were all the same age at the time.

I grew up that if tomorrow was going to be a problem then start dealing with it now. I don’t like lizards by the way. I grew to never miss that I didn’t know about. Television sitcoms and later the internet changed my perception. Hey, I want money for nothing too and no responsibility. I never got why soap operas existed until I started watching “professional” wrestling. I even have the time to watch Ellen now and again. The cult of self-indulgence grows. Like why do those poor Quebecers spend so much time in Florida? Anyway, yesterday is only a memory. Being Canadian can suck for at least a few months every year. Oh, is that the principal’s office calling me again?

#48 Felix on 12.28.19 at 10:39 am

Revealing photo.

Fake canines made out of snow are actually 5x more intelligent than biological dogs.

Plus they don’t crap on your neighbour’s lawn or make their owners dumber.

So get a snow dog. And a real cat.

Problems solved.

#49 Sail Away on 12.28.19 at 11:40 am

#42 Yanniel on 12.28.19 at 12:15 am

If the bonds are in the RRSP, how could one rotate money from bonds to equities upon rebalancing time without triggering a lofty taxation and forfeiting a chunk of your tax deferral capacity?

——————————

Yanniel, it sounds like your concern is about a detail. Garth’s guidelines aren’t unbreakable laws.

When rebalancing, if you’re overweight bonds, just sell bonds and buy equities within the RRSP. There will probably be plenty of time to regain the balance before taking distributions.

#50 Pete on 12.28.19 at 6:39 pm

Not sure about the market, but banks have started calling loans and getting ready for recession starting some time in 2020. Bankruptcies are beginning to spike. it might be a short one, but it’s coming.

#51 Yanniel on 12.29.19 at 1:04 pm

#49 Sail Away on 12.28.19 at 11:40 am
#42 Yanniel on 12.28.19 at 12:15 am

If the bonds are in the RRSP, how could one rotate money from bonds to equities upon rebalancing time without triggering a lofty taxation and forfeiting a chunk of your tax deferral capacity?

——————————

Yanniel, it sounds like your concern is about a detail. Garth’s guidelines aren’t unbreakable laws.

When rebalancing, if you’re overweight bonds, just sell bonds and buy equities within the RRSP. There will probably be plenty of time to regain the balance before taking distributions.

– ok. Fair enough.

Here is another concern with the guideline. We live in a low yielding world and that has implications for the efficacy of the guideline. You don’t save much by avoiding the taxation of interest, because the interest are very low. Just think of the decade that’s ending. Now, you do save a lot by avoiding the capital gain + dividends that stem from equities.

A person with sufficient saving capacity can fill the RRSP always and contribute to TFSA and non-regs. Under this scenario, the RRSP would be filled with bonds. Is that what you want? Imagine the compounding of all those capital gains and dividends not taxed inside the RRSP vs the compounding of the interest you kept in full.