Face lifts

DOUG  By Guest Blogger Doug Rowat

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Say the words “hedge fund” and an impression is evoked of ultra-sophisticated investment products available only to the most well-heeled investors which virtually always achieve stellar market returns.

Dr. Douglas R. McKay, writing for the Canadian Society of Plastic Surgeons, highlights the hedge fund cliché:

Hedge fund managers are portrayed as the super-elite of the extravagantly wealthy who garner enormous bonuses as a result of wild double- and triple-digit yearly returns.

While Dr. McKay emphasizes that this impression is often inaccurate, the fact that he’s writing on behalf of the Canadian Society of Plastic Surgeons probably does little to dispel the view that hedge funds are only for the “extravagantly wealthy”. Indeed, Dr. McKay goes on to highlight that “some of Canada’s best-known hedge funds carry $3 million minimums to get your foot in the door.”

So, do hedge funds deserve the hype, and are wealthy investors really gaining an advantage over every-day investors by owning them?

The answer is an emphatic no.

The ineffectiveness of hedge funds (and, as a corollary, the effectiveness of low-cost ETFs) was highlighted by—who else—Warren Buffett in 2008 when he made his now-famous US$1 million bet against an asset manager at Protégé Partners arguing that a simple S&P 500 Index fund would outperform a hand-picked selection of hedge funds over the coming decade. Buffett, of course, won the bet with his ETF gaining approximately 126% versus only a 36% gain for the hand-picked hedge funds.

So, who really got rich from the hedge fund investment? The fund managers. Buffett estimated that they took home “60% – gulp! – of all gains.” (Buffett’s winnings from the bet went to charity.)

Buffett’s win and the underperformance of the Protégé picks wasn’t an anomaly. Hedge funds collectively have a shameful long-term record versus the broader US equity market:

HFRX Global Hedge Fund Index (white line) vs the S&P500 (orange): A decade of horrendous underperformance for hedge funds.

Source: Bloomberg

Because of this dismal performance history, the hedge fund industry is badly suffering. 2019 was particularly tough. Bloomberg highlights as much:

The pain kept coming for hedge funds in 2019: if they weren’t being killed off, they were bleeding cash or wringing out dismal returns.

The industry is now on track to record more closures than launches for a fifth straight year, a blow to a market that once minted millionaires at a heady pace. More than 4,000 funds have been liquidated in the past five years…

So, it’s much more likely that the plastic surgeon driving past you in their brand new Porsche got that car not because of the performance of their fancy hedge fund, but simply because they’re charging exorbitant amounts for tummy tucks and face lifts.

Don’t worry though, the manager of that fancy hedge fund driving past the plastic surgeon in an even nicer Porsche? Well, they’re probably out looking for work.

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

 

71 comments ↓

#1 Shawn Allen on 01.25.20 at 12:50 pm

Housing Capital Gains

Nonplused yesterday claimed:

Let’s say they did $100,000 in renos (I don’t know the exact amount) to make the house more marketable, and let’s say it did add exactly $100,000 to the value of the house. But wait, that’s a capital gain!

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No, that is not a gain of any kind. That’s $100k added to the cost and $100k added to the value for a net zero gain. And a small loss considering it added to the real estate commission cost of selling.

Any proposal to tax capital gains on principal residences would have to take into account not just the original cost of the house but the cost of capital upgrades . (Just like on a rental property maintenance and mortgage interest are operating costs and not capital costs, so no dice trying to get mortgage interest into the cost.)

I don’t know how they would deal with the fact that people did not keep receipts for renovations done over the years.

I don’t think we will see a capital gains tax on personal residences unless it is restricted to very expensive houses and probably to short-term flipping.

P.S. Sorry I am a day late with this comment. Nice to see Doug recognizing Buffett in his article here! The money from that bet went to an Omaha charity. And it ended up being far more than a million dollars because the bet money itself (put up by Buffett and the hedge guy) was invested (initially in ten year bonds) and grew. Buffett cashed it out of the ten year bonds at some intermediate point. I think they put up around $500k each which was supposed to grow to a million but it grew way more.

#2 DON on 01.25.20 at 1:11 pm

Good Morning Doug…Good Read – Thank you

from yesterday

#94 Ustabe on 01.24.20 at 7:19 pm

Harper is no longer on the throne Garth.
He sure seems to be the puppet master behind the scenes.

Conservatives are demanding more than cosmetic changes if not they risk fragmentation.
The backroom boys, the war room boys, sure don’t seem eager for constructive change. Already dealing with a social conservative would be leader’s public statements.

Just throw the name in with a statement on where you stand and roll the dice.
Throwing your name in comes with a $300,000 non-refundable cash payment to the CPC. Maybe Garth could get a HELOC?
*********
Yes, Harper is still the puppet master behind the scenes, and that is why they face fragmentation or 2nd place in the next election. But Harper isn’t liked by all Canadians. And after the last election the ‘back room boys’ are in the spotlight.

The $300K is a hurdle, but there is crowd sourcing and already a blog with enough suppporters.

Where there is a will there is a way. But I respect the ‘no will’ part for various reasons.

Just dreaming!

#3 Sail Away on 01.25.20 at 1:26 pm

Porsches… so retro

#4 Remembrancer on 01.25.20 at 1:27 pm

#1 Shawn Allen on 01.25.20 at 12:50 pm
(Just like on a rental property maintenance and mortgage interest are operating costs and not capital costs, so no dice trying to get mortgage interest into the cost.)
—————————————
Good point on the cost vs. expense for “improvements”.
You can of course claim the mortgage interest, while an operating rental, as an expense against rental income… But as you say, that’s apples and oranges.

#5 Sail Away on 01.25.20 at 1:36 pm

https://www.berkshirehathaway.com/letters/letters.html

2017 letter, page 11. But don’t stop there, read all the letters.

#6 Sail Away on 01.25.20 at 1:47 pm

Buffett on the bet:

“The bet illuminated another important investment lesson: Though markets are generally rational, they
occasionally do crazy things. Seizing the opportunities then offered does not require great intelligence, a degree in
economics or a familiarity with Wall Street jargon such as alpha and beta. What investors then need instead is an
ability to both disregard mob fears or enthusiasms and to focus on a few simple fundamentals. A willingness to look
unimaginative for a sustained period – or even to look foolish – is also essential.”

That’s it.

Tater, I’m not sure where Sharpe and Sortino fall in there. Jargon?

#7 The other Doug, in London on 01.25.20 at 2:24 pm

Why would you invest in something complicated like a hedge fund when you can use the time tried, tested, proven, and ridiculously simple method of buying only what’s on sale? Say, has anyone checked out the amazing deals on oil and gas companies lately?

#8 Sail Away on 01.25.20 at 3:20 pm

#7 The other Doug, in London on 01.25.20 at 2:24 pm

Why would you invest in something complicated like a hedge fund when you can use the time tried, tested, proven, and ridiculously simple method of buying only what’s on sale? Say, has anyone checked out the amazing deals on oil and gas companies lately?

——————————-

Doug, they’ve been on sale for 15 years and plenty of people have been crushed thinking the bottom was here. Are you calling a bottom?

#9 Shawn on 01.25.20 at 3:30 pm

Big drop in oil $CAD and interest rates coming.

#10 CD on 01.25.20 at 3:38 pm

“but simply because they’re charging exorbitant amounts for tummy tucks and face lifts.”

“Draw me a life line…Once in a lifetime”

“Don’t worry though, the manager of that fancy hedge fund driving past the plastic surgeon in an even nicer Porsche? Well, they’re probably out looking for work.”

“I believe if I just try”

“Buffett, of course, won the bet with his ETF gaining approximately 126% versus only a 36% gain for the hand-picked hedge funds.”

#11 Yanniel on 01.25.20 at 3:38 pm

Here’s a rhetorical question: should the same bet be placed (today) at the start of this new decade; is it rational to expect the outcome would be the same? Was it really dumb of Ted Seides to take the bet? Was it always clear along the way Buffet would win?

Here’s more nuanced view about the Buffet Bet: https://investresolve.com/blog/resolves-buffett-bet-portfolio-risk-parity-and-factors/

Hedge funds have the word “hedge” on the name. The mandates are often not to beat an index. But to hedge.

This is something the customers of Michael Burry probably appreciate. These funds are often considered an investment class. Some people with real money allocate a portion to them for its diversification benefits; not in the hope of getting higher returns. Using the S&P 500 as a benchmark is unfair in my opinion. Do we compare bonds against the S&P500?

The underperformance of hedge funds is not specific to them. Most money allocators, institutional or retail, amateur or professional either underperform or simply follow the crowd. Deviating might get you fired even if you had good reasons to deviate from whatever is considered the hot benchmark of the moment.

#12 WUL on 01.25.20 at 3:42 pm

There are different names for hedge fund managers. Many of them can be found in the Criminal Code of Canada.

#13 MF on 01.25.20 at 3:48 pm

This new strain of corona virus is making for some intersting observations on human behaviour and thought patterns.

On one hand you have the alarmists, who view this as the beginning of a modern plague. They aim to alarm people by telling them to stock up on foods, avoid people at all costs (no public transport, grocery stores etc.), and to expect the worst.

On the other end are people who are unfazed by the whole thing, and optimistic. “Just wash your hands often, avoid people who are sick, eat lots of vitamin c and you’ll be okay” they say.

The vast majority of people are somewhere in the middle. Slightly worried but trying not to panic, trying to keep things in perspective, trying to trust the government is doing what they can, and trying to go about their lives.

Mixed in to these groups are:

the anti vaxxers (this is all created in a lab so that we can be “saved” by a new expensive vaccine),

the anarchist/cynics (the government doesn’t care about you they are trying to keep our population in check),

the uneducated (who think a lower mortality rate is always better or don’t understand mutation),

the opportunist (who are wondering which stock they can buy to profit off of this?) and so on.

My conclusion is that, like all other issues now a days, the internet has allowed misinformation and emotion to cloud the truth, and, the truth is it’s too early to know the impact of this strain of corona virus. All we can do is wait.

Very interesting times.

MF

#14 Shawn Allen on 01.25.20 at 3:52 pm

Congratualtiosn Habbit and thank you RRSP

#138 Habbit on 01.25.20 at 9:26 am

Hi Garth. Thank you for all you do. I’ve been laid off again second time in three years. I’m 64 with little chance of re employment. We live in Saskatchewan and things are tough here now. We are fortunate and can move from our rental suite to our cabin at buffalo pound lake. My cpp covers everything for the place as it’s paid for. Oas pays vehicle expenses. My wife’s cpp/oas covers our grub and wine lol and still leaves us a few hundred to blow. We have 700 k in rrsp etc to use later should we need care.

************************************
So here’s apparently a regular guy and his wife with no company pensions and they managed to accumulate $700k in RRSP etc. And has a cabin too. Well done!

They are not the 1% or the 10% but I suspect they are well into the top third or more of their contemporaries. Especially, they are way ahead of the group with no company pensions, probably in the top 10% of that group easily.

I wonder how much credit the RRSP program gets for that. Did they invest primarily to get the RRSP tax credit? And how much (how little!) after-tax cash did they invest which is now $700k in (mostly it seems) pre-taxed money? An with no company pensions they can get that RRSP money out over time at a low tax rate.

Did even the nice lady at the bank or god forbid a mutual fund salesman encourage some of this savings over the years? Do tell.

#15 Don Guillermo on 01.25.20 at 5:17 pm

#3 Sail Away on 01.25.20 at 1:26 pm
Porsches… so retro
****************************************

https://www.motor1.com/news/394834/porsche-super-bowl-commercial/

#16 Ustabe on 01.25.20 at 5:25 pm

@ Linda, from yesterday:
“…water, water treatment, sewer, storm sewer, roads, bridges, sidewalks, street lights, fire hydrants, utilities plus services like plowing/sanding/repairing the roads, garbage pickup/removal, fire station. None of that is free or cheap. So if a small town has the infrastructure but doesn’t have the population of a big city to pay for it, the local property tax bill is going to be a lot higher.”

I just looked it up and my small (under 20,000) population town which has millions in its rainy day fund AND which also provides organic and regular recycling pick up among other things not on your list manages to keep property taxation fairly low.

I live sort of on the outskirts where lots get a bit larger (we are 6 to the acre I think) and on a year round salmon bearing stream and my property taxes are approximately $2,500 per year.

That covers the town library and rec centre as well. Plus all the nice shiny trucks the fire department runs around in. But wait, there is more…that also includes my share of town policing.

I am familiar with property taxation in Napanee, Tswwassen, Delta, Vancouver, Calgary and of course mine, here. Except for the house in Napanee, Ontario, all are on significantly smaller lots, all have less services included (for instance in Calgary the water bill is additional, like a gas or electric bill.). Yet all pay significantly more in property tax than I do.

Your statement of fact is merely an opinion…and a false one at that.

#17 Doug Rowat on 01.25.20 at 5:27 pm

#11 Yanniel on 01.25.20 at 3:38 pm

Hedge funds have the word “hedge” on the name. The mandates are often not to beat an index. But to hedge.

These funds are often considered an investment class. Some people with real money allocate a portion to them for its diversification benefits; not in the hope of getting higher returns. Using the S&P 500 as a benchmark is unfair in my opinion. Do we compare bonds against the S&P500?

There a lots of ways to get low-to-negative correlations within a portfolio, or even to hedge against black-swan events, at much lower cost than hedge funds.

And if they’re being launched (and, according to you, bought) not for their returns but as simply portfolio protection, then why is the industry imploding?

At the very least then they’re being disingenuously marketed.

–Doug

#18 Grunt on 01.25.20 at 5:45 pm

Not much to write about this week Doug? Except maybe the Coronavirus…

#19 Two-thirds on 01.25.20 at 5:46 pm

So to summarize “pooched week” and miscellaneous blog canons of the recent past:

– Owning housing is bad, rent it instead
– Own financial assets that (if registered) the government knows exactly how much you have
– Lease a vehicle, don’t buy it (especially new)
– Children are pricey, dogs are best

While generally speaking, modern life features:

– All you can watch media and entertainment (Audio, video, books, etc) on-demand – more rent, not own
– Mobile phone plans where the device is costed into the monthly fee, never-ending subscriptions and upgrades
– Food delivery by app, who needs a fridge and a pantry?
– Credit, not cash: rent money, don’t own it
– Mobility-as-a-service, on-demand. Who needs a car?

So, is the future we are careening into one where ownership goes extinct? Will it ever be banned?

Having everything you could ever wish for at the push of a (virtual) button, anytime, anywhere, and nothing of your own?

The “sharing economy” by decree?

Save the planet, decarbonization by legislated penury?

Universal income? Virtual riches?

Hate to say it, but some of our resident doomers may have a point…

Time to maybe splurge on that expensive sports car, while still permitted…

#20 Apocalypse2020 on 01.25.20 at 6:04 pm

BREAKING NEWS

Coronavirus now in Toronto.

https://www.cbc.ca/news/canada/toronto/canada-1st-case-coronavirus-toronto-1.5440760

2020 will be a year of global chaos and devastation.

PREPARE

#21 TurnerNation on 01.25.20 at 6:20 pm

Aha this must be the Hedgie’s car:

https://www.instagram.com/p/B5awVbUn8tV/

………………………
Where are the customers’ blogs? ;-)

#22 Ronaldo on 01.25.20 at 6:26 pm

#8 Sail Away on 01.25.20 at 3:20 pm
#7 The other Doug, in London on 01.25.20 at 2:24 pm

Why would you invest in something complicated like a hedge fund when you can use the time tried, tested, proven, and ridiculously simple method of buying only what’s on sale? Say, has anyone checked out the amazing deals on oil and gas companies lately?

——————————-

Doug, they’ve been on sale for 15 years and plenty of people have been crushed thinking the bottom was here. Are you calling a bottom?
—————————————————————-
I recall someone on this blog a couple years ago talking about holding onto his XEG shares that he had scooped up over the previous three years as they were such a bargain. I believe they were around $15 at the time. Wonder if he is still hanging onto them.

#23 AlMac on 01.25.20 at 6:28 pm

Love the weekend posts from the Porsche drivers. Doug, I am in the annual process of re-balancing my portfolio and investing the new 6k in the TFSA; I am over-weight US growth because the US has done so well relative to other growth and fixed etfs. Have you trimmed or changed the your 60/40 portfolio weightings this past year or stayed close to what Garth has provided previously?

#24 Parksville Prankster on 01.25.20 at 6:43 pm

Hedge Fund Managers and Financial Prognosticators… the only reason they call them ‘Gurus’, is because ‘Charlatan’ is much more difficult to spell. Even more telling is that dead people have better overall returns than active traders.
The most effective investment strategy seems to be sloth, bordering on laziness.
Set it and forget it for a few decades. Sure rebalance now and then to return to the original acceptable risk level, but other than that, leave it alone for decades.
A portfolio is like a bar of soap, the more you touch it, (or the more you let other ‘helpers’ touch it), the smaller it gets.

#25 Lambchop on 01.25.20 at 6:46 pm

“Investing is an activity in which consumption today is foregone in an attempt to allow greater consumption at a later date. “Risk” is the possibility that this objective won’t be attained.” ~ Warren Buffett ~

But…my avocado toast and latte…

#26 crazyfox on 01.25.20 at 6:59 pm

#9 Shawn on 01.25.20 at 3:30 pm

As well as gas. Look at what record oil production from the Permian has done to gas (in January):

https://www.nasdaq.com/market-activity/commodities/ng%3Anmx

It’s well explained here: https://oilprice.com/Energy/Gas-Prices/Has-Natural-Gas-Hit-Rock-Bottom.html

Sub $2 bucks… most producers are losing money at $2 bucks. (about 80% at $2.20) This is what a bust looks like. Only hedges can save them now, at least, for a while. Oil can drop to the low 40’s before oil companies rethink development in the Permian. When we get to these prices, watch for drill counts out of Texas. If they start to drop (sub $40 prices would take us there), look for Trump to impose oil sanctions on Iraq. Doesn’t matter the excuse, Trump’s ruined 2 national economies already (Venezuela & Iran) and 56% approve his handling of the economy so…

It really is America first there but in hind sight and foresight, Trumps oil embargoes (trade war with China is related as well, I think the primary reason, to force China to comply with restricted oil imports from Iran) have created close to 2 million barrels of oil shut in from Venezuela:

https://tradingeconomics.com/venezuela/crude-oil-production

Plus 1.7… 1.8 million barrels of oil production from Iran:

https://tradingeconomics.com/iran/crude-oil-production

The key question is, where does Trump go next on the list of oil producers to shrink world production making room for future oil production growth fueled by strong prices?

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

Trump said he’d put an oil embargo on Iraq if they don’t change their mind in asking Americans to leave Iraq a couple weeks back. Iraq produces a 1/3rd of their own resources so this would create a 1.3 to 1.5 million bpd oil production drop which could keep the U.S. in good oil prices fueling oil production for at least another year and help Trump’s re-election but what is being created here is a big mess since now the world will have a 3rd ruined international economy and they can’t stay ruined forever. If/when they come back online, oil becomes a bust.

As for the Trump train, or CIA playbook or U.S. oil empire continues down its tracks, we will continue to see an increased chance for war and likely 3 nations or more in economic ruin for no other reason really than they produced oil and at some point it will have to end. If Trump remains in power, it is unlikely to end unless he is elected as a lame duck president and even so. If the Democrats win the presidency and Senate and there’s a good shot at both:

https://en.wikipedia.org/wiki/2020_United_States_Senate_elections

23 Senate seats are Republican incumbents, while 12 are Democrat (21 Republican seats are up for grabs in Congress, while 13 Dem seats are up for re-election), things are likely to change. Presently the guy with the bum ticker leads the polls, so who knows.

If Trump wins, he could very likely be a lame duck president. Republicans have to hold the Senate for Trump to hold power the way he has and that remains to be seen as they have to keep the Dems from flipping 4 seats.

Let’s suppose Trump wins and the Republicans hold the Senate for a moment. What does this mean for the future of O & G? It means, if the Texas Permian basin is to continue it’s growth meaning oil will need to be above $40 a barrel to do it. This means more trade wars and oil embargoes to shrink the world production pie to make room for future U.S. oil production growth. It means the main trade tariffs on China likely will not end because they are related to Chinese oil imports out of Iran. It means that if Trump is re-elected with a Republican majority senate, that the price of natural gas is in the shitter until development in the Permian basin dramatically slows (likely beyond this as the natural gas scene is classic overproduction fueled with nat gas Permian basin by-product that goes up over time as the basin becomes more gassy, leading to a long drawn out bust). It means that the next nation to see it’s economy in ruin is… Angola? :

https://tradingeconomics.com/angola/crude-oil-production

Algeria?

https://tradingeconomics.com/algeria/crude-oil-production

Iraq is most likely next but if this U.S. plan continues, which nation follows? Does America give up being “first” and we watch, with the advent of EV’s hitting the road in 2021, 2022, the end of peak oil consumption, an oil crash and the abatement of global risk? Or does it continue under Trump with a series of nations crushed under their policies while Russia and China continue, at least in public, to outpace the U.S. in missile tech and where does that end?

Or do the Dems win, oil embargoes end incrementally, oil goes to bust, nat gas gets put on life support, the economy slows or recesses and what must happen comes sooner than later. Can’t say can we, all we can do is react to “if then’s”. If the price of oil drops below $40 bucks, look for oil sanctions on Iraq at least until 2020 and then look for a mess to blow up from there. The U.S. will either find it’s moral compass and bite the bullet and allow O & G to self regulate (meaning bust, nat gas is already there) or it will not and as time and trade wars and resource wars roll on, along with it missile tech advances, so do the increased chances of a world war.

#27 Lost...but not leased on 01.25.20 at 7:06 pm

#13 MF

….has blessed us with another of their (?????)comments..

Probably increased their publically funded pensions(no doubt about to be collapsed)

PS: Puleeze submit Union- certified witty- retort here:

(______________________________________________________________________________________________________________)

#28 NoName on 01.25.20 at 7:12 pm

#13 MF on 01.25.20 at 3:48 pm

Interesting observation. So what is a middle and what should be done in your opinion.

In 1972 my old man was an intern at the hospital what was an epicenter of “variola vera” (small pox or black pox) in Belgrade when that thing went down, i remember bit and pices he told me once hole city was under quote time, hotels were converted to hospitals/quorentine holding area, public transport was shot down. That thing was much more deadlier like 25-30% of infected people perished, out of 200.or something like that, he spent weeks probably month and half not being allowed to leave. And let be honest people in yougoslavia in 1972 nowhere near mobile as now days. They know who was patient 0 and where despise came from.
I remember watching movi about event and my old man was telling me wat they got write and what was wrong. Hit wiki.

What China is doing putting citys Inder quorentine is good thing in my opinion. @3% mortality is lots of people if gets out of hand, but question is how correct is that number.

#29 SoggyShorts on 01.25.20 at 7:39 pm

#11 Yanniel on 01.25.20 at 3:38 pm
Using the S&P 500 as a benchmark is unfair in my opinion. Do we compare bonds against the S&P500?
*******************
Yeah, I finally gave my advisor the boot the same week after he compared my returns (net of fees as I requested for a change!) vs bonds when my PF was 80/20.

Personally, I can’t wait for next month when VEQT.TO has been around for a full year so that I have a real benchmark that I can use since I’ve been cheating myself by using VGRO vs my all equity PF.

BTW thanks for the link to Canadian moose the other day re expat stuff

#30 oh bouy on 01.25.20 at 7:45 pm

@#13 MF on 01.25.20 at 3:48 pm
____________________________

substantially more folks will die from the measles this year. antivaxxers beware.

#31 oh bouy on 01.25.20 at 7:46 pm

@#20 Apocalypse2020 on 01.25.20 at 6:04 pm
BREAKING NEWS

Coronavirus now in Toronto.

https://www.cbc.ca/news/canada/toronto/canada-1st-case-coronavirus-toronto-1.5440760

2020 will be a year of global chaos and devastation.

PREPARE
______________________________

LOL

#32 Apocalypse2020 on 01.25.20 at 7:49 pm

Retail traffic at Toronto area grocery stores has taken an unexpected dive the last 90 minutes. Likely due to the virus news creating concerns.

Go against the herd. This is exactly the time to get to the store and stock up on canned goods.

And fuel up your vehicle.

Do it now.

PREPARE

#33 IHCTD9 on 01.25.20 at 7:53 pm

#147 Linda on 01.25.20 at 3:59 pm
Property taxes are indeed much more expensive in smaller locales. Think about the cost for infrastructure – water, water treatment, sewer, storm sewer, roads, bridges, sidewalks, street lights, fire hydrants, utilities plus services like plowing/sanding/repairing the roads, garbage pickup/removal, fire station. None of that is free or cheap. So if a small town has the infrastructure but doesn’t have the population of a big city to pay for it, the local property tax bill is going to be a lot higher. We looked at the idea of moving to a smaller locale upon retirement, but the lower cost of housing was more than offset by the higher property taxes plus the reduced amenities/services on offer. Big cities attract people for more reasons than jobs alone.
———-

All that infrastructure you mention was built decades ago, most of it is still the same. The increases in taxes come from other places. For instance, Sudbury’s 2020 budget shows 36% of the entire budget is consumed by Police, Fire, and Paramedic services. Add social services on top, and you find government supplied services alone eat half of the entire budget. Compare that to roads, bridges etc.. at 18% of the total.

As far as retiring in the big city goes, sure if you got on the RE ladder decades ago, and now own a 7 figure sfd outright today, plus have enough saved to retire on top – well, the world is your oyster.

But kids today who do not own, will find over 90% of small town property taxes absolutely do not increase the cost of ownership over a million dollar shack in the GTA. That’s not to say they won’t bail someday because of subsequent increases, but that’s decades down the road.

FWIW, my small town taxes are about 2700.00/yr. That’s a total rip for what I get from them, but not yet enough to affect the salability of my house.

#34 Long-Time Lurker on 01.25.20 at 7:56 pm

What I read in 2019 was that Ray Dalio’s All Alpha Fund was dead in the water while his All-Weather Fund was making money. There were lots of hedge funds closing down in 2019, as well.

#52 Robert Ash on 01.24.20 at 1:36 am
I would be curious to get some feed back that if the world is awash in cash, why are Central Bankers still Easing, and injecting liquidity into the system. Is it destined for Industrial activity and just sliding into the Capital Markets? If interest rates are so low, is this a Currency Relative strategy, to augment Exports… Any feed back would be appreciated, and I know very little, and admit I am on the Learning curve…. Out right guesses are OK as well… Cheers.

>What started the repo rescue? Hint: 10%.

#35 MF on 01.25.20 at 8:10 pm

#27 Lost…but not leased on 01.25.20 a

Lol. Now your just teasing.

28 NoName on 01.25.20 at 7:12

Yeah it’s an interesting observation. We tend to forget about viruses and bacteria until we are sick, or, until we read a history book.

The truth is every second we are alive, we are fighting off potentially dangerous illnesses. We ingest them with food, breathe them in. The fact we don’t get sick more often is testament to how incredible the immune system is.

Glad your dad made it out. I’ll look it up on wiki for sure.
Interesting thing is sometimes the mortality rate determines how much of a threat the disease poses. A higher mortality like Ebola, for example, kills its host so quick they don’t have time to spread the disease and they can be identified and isolated easier. It’s dangerous if someone does get infected though. That’s why this one is a little worrisome. Spreads through droplets rather easily, lower (but not zero) mortality, mimics other viruses, leads to pneumonia (more serious) often, and can mutate very easily. The potential reservoir is huge. And that worries the authorities.

What can we do? Not much other than the obvious (stay healthy, avoid people who are sick, wash hands often etc.) and wait until we know more information in the next few weeks. Good on China for taking serious precautions finally.

MF

#36 Nonplused on 01.25.20 at 8:11 pm

#1 Shawn Allen

I did of course argue in that same post that various expenses would have to be included or deducted if there was a capital gains tax on primary residences, much as in the case where the property is rented out, so I agree with your treatment. But I don’t think this is where the proponents of a capital gains tax on primary residences are going with this. They’ll just say such renovations are no different than maintenance like say when you need a new roof or furnace. The walls need to be painted every so many years so no deduction for you.

#37 Former Trader on 01.25.20 at 8:19 pm

Being a trader for a hedge fund or indeed any “%” deal is great. Here’s why:

Say your deal is you get a modest salary but 20% of any gains to your “book”. Well, it’s not your money so you have no downside. So what you do is flip a coin and lever up. If you happen upon a big gain, you get 20%! If you happen to strike out oh well you personally didn’t lose any money.

All of the big names in the hedge fund industry, or at least most of them, found success merely because they happened to call the flip of the coin right a few times in a row. Investors tend to follow the successful funds so with each flip they had more money (and thus more leverage) to gamble with. If this happens a few times in a row, well they can just retire when they get fired after the first wrong call.

It’s a sweet deal really. For the trader that is. The investors are taking huge leveraged risks and even when it does pay off a bunch of money gets siphoned off the winnings. The traders and the fund do not return any money when they lose.

#38 IHCTD9 on 01.25.20 at 8:29 pm

#16 Ustabe on 01.25.20 at 5:25 pm
——-

I find small towns sometimes have a huge disparity in their budgets for the same services.

The City I pay taxes to, 50K pop. 8.4% of the budget for Fire and Police.

Sudbury taxes, 165K pop. 32% of the budget for Fire and Police.

Both have city Fire and OPP – why almost 400% more in Sudbury?

#39 espressobob on 01.25.20 at 8:37 pm

Hedge funds are laughable at best and require an entry amount roughly 150k minimum unless one is an accredited investor. Exiting said funds usually requires 30 days notice or more.

One I know of even charges an additional performance fee. Seems to be a case of crossed wires.

#40 Nonplused on 01.25.20 at 8:48 pm

#116 PetertheSeparatistfromCalgary on 01.24.20 at 11:14 pm

You are correct that Canada is twice the size the Roman empire was, but that is irrelevant since only about 1/4 of Canada is habitable. Once you get about 1/2 hour north of Edmonton, there is nothing but trees (and oil wells). The Roman empire, on the other hand, was mostly all habitable. There is a reason that most Canadians live within 100 miles of the US boarder. It’s already too damn cold to be that far north and I am sure we would all move south by a couple hundred miles if we could.

Canada is vast. But it is a vast wasteland. It probably can’t support much more than it’s current population which is mostly huddled along the US border. Sure, we have lots of natural resources, but trust me nobody want to live in Fort Mac. Nobody retires there. The summers are pleasant but the winters are to die for (literally).

It is no coincidence that Toronto is south of the 49th parallel and is also our most populous city. It is also no coincidence that after the war of independence the US left Canada to the Brits and went west, not north. Not all land has the same value. California was worth more than all of Canada. Still is.

#41 Skatch on 01.25.20 at 8:54 pm

What about Renaissance Technologies hedge fund?

#42 leebow on 01.25.20 at 9:29 pm

#28 NoName

Mortality is a temporal concept. This morning I saw stats for one of the cities. 750 infected, 39 dead, 32 recovered. So 750-39-32 = 680 are infected but didn’t decide what they are going to do as of yet.

Does this stat imply 39/750 = 5% mortality, or 39/(39+32) = 50% mortality? Probably something in the middle.

#43 Doug Rowat on 01.25.20 at 9:47 pm

#29 SoggyShorts on 01.25.20 at 7:39 pm
#11 Yanniel on 01.25.20 at 3:38 pm
Using the S&P 500 as a benchmark is unfair in my opinion. Do we compare bonds against the S&P500?
*******************
Yeah, I finally gave my advisor the boot the same week after he compared my returns (net of fees as I requested for a change!) vs bonds when my PF was 80/20.

Petr Nedved, who throughout his NHL career had a perpetually inflated sense of his own worth, was rocking about 6 goals one year in the mid-90s and demanded a trade. One comedian joked at the time, “What do they trade him for? A pack of smokes?”

Hedge funds have done 1% annually for a decade. Benchmark them against anything you want. They’re still worth a pack of smokes.

–Doug

#44 Drinking and Smoking on 01.25.20 at 9:55 pm

#31 oh bouy

Can’t figure out if you are just a condescending idiot or just a condescending idiot! Many posters have made good points and yet you discredit them without one once of proof on your part! Sure believe China’s numbers and the incompetence of the Western World! Next week will be a whole new ballgame bouy or girly! Numbskull! Get your head out of your @ss!

#45 Yanniel on 01.25.20 at 11:27 pm

#17 Doug Rowat on 01.25.20 at 5:27 pm
#11 Yanniel on 01.25.20 at 3:38 pm

“There a lots of ways to get low-to-negative correlations within a portfolio, or even to hedge against black-swan events, at much lower cost than hedge funds.” I agree.

“And if they’re being launched (and, according to you, bought)” I did not say such a thing. I have to work on my English.

“ not for their returns but as simply portfolio protection, then why is the industry imploding?” I don’t know. A conjecture: these days you can buy very complex strategies in ETF form way cheaper (strategies that typically belonged to the realm of hedge funds are bundled as securities with a ticker). Indexing hasn’t helped either.

“At the very least then they’re being disingenuously marketed.“ I agree.

#46 Toronto Tomas on 01.25.20 at 11:28 pm

https://trib.al/vd9yPH5

Wuhan, great coverage, not Canadian if course.

#47 NoName on 01.25.20 at 11:34 pm

#42 leebow on 01.25.20 at 9:29 pm
#28 NoName

Mortality is a temporal concept. This morning I saw stats for one of the cities. 750 infected, 39 dead, 32 recovered. So 750-39-32 = 680 are infected but didn’t decide what they are going to do as of yet.

Does this stat imply 39/750 = 5% mortality, or 39/(39+32) = 50% mortality? Probably something in the middle.

doesnt work like that !!! read.

https://www.forexlive.com/news/!/china-number-of-coronavirus-virus-cases-rises-to-1975-20200126

#48 Yanniel on 01.25.20 at 11:36 pm

#17 Doug Rowat on 01.25.20 at 5:27 pm
#11 Yanniel on 01.25.20 at 3:38 pm

“There a lots of ways to get low-to-negative correlations within a portfolio, or even to hedge against black-swan events, at much lower cost than hedge funds.” I agree.

“And if they’re being launched (and, according to you, bought)” It was not my intention to infer such a thing. I have to work on my English.

“ not for their returns but as simply portfolio protection, then why is the industry imploding?” I don’t know. A conjecture: these days you can buy very complex strategies in ETF form way cheaper (strategies that typically belonged to the realm of hedge funds are bundled as securities with a ticker). Indexing hasn’t helped either.

“At the very least then they’re being disingenuously marketed.“ I agree.

#49 Lost...but not leased on 01.25.20 at 11:36 pm

# 35 MF….

..OMG !!!

(……not sayin that a challenge to TurdeaU 2.0 via 99.9% canUchistan we wouldn’t be in terminal
welcome/necessary/desperation mode.

#50 crowdedelevatorfartz on 01.25.20 at 11:51 pm

@#32 Apocalypto 2020
” This is exactly the time to get to the store and stock up on canned goods.”
++++
Bunker busters…..
Bullion, beans, bumwad, bullets and a Bible ( just in case to have to perform a quickie marriage) …..oh…..almost forgot…..
booze….

#51 Yanniel on 01.26.20 at 12:35 am

#29 SoggyShorts on 01.25.20 at 7:39 pm
#11 Yanniel on 01.25.20 at 3:38 pm

“I can’t wait for next month when VEQT.TO has been around for a full year so that I have a real benchmark”

I am also hoping to use VEQT as an all equity benchmark. My goal is to use it to implement a simple strategy based on time series momentum. The goal would be to systematically adjust my equity exposure. It would go like this:

1.) On the 1st day of the month I’ll determine if the total return of VEQT has been above the risk free rate (i’ll probably use ZST as a proxy for the risk free rate). I’ll use five lookback periods: 4, 6, 8, 10 and 12 months.

2.) for each lookback with positive momentum I’ll allocate 20% to equities. This means at any given moment my equity exposure would be 0, 20, 40, 60, 80 and 100%. Perfcharts can be used for free to determine the total return over a particular lookback horizon.

3.) I’ll map the percentages above to an aggregate bond ETF(haven’t decide yet), VCIP, VCNS, VBAL, VGRO or VEQT.

4.) I’ll have just one ETF in my account at a given time. At the most I’ll trade once month (sell-buy) if the eq allocation changes. I’ll use a broker that won’t charge me commissions. One hour once a month is all that’s needed to execute all this.

I have yet to back test this though. The challenge is on not having historical data for these all in one ETFs. I am planning on using some other ETFs as proxies to backtest. Not quite the same but close.

“BTW thanks for the link to Canadian moose the other day re expat stuff” Any time.

#52 akashic record on 01.26.20 at 1:20 am

#13 MF

https://www.zerohedge.com/geopolitical/did-china-steal-coronavirus-canada-and-weaponize-it

Also:

Science proves that checking temperature at airports is an effective measure against a decease, which has 5 days of incubation period, without showing sign of symptoms.

#53 yvr_lurker on 01.26.20 at 1:32 am

Just re-watched the movie Contagion on Netflix tonight. One day, a plague of this nature is likely in my view. Am glad that China quickly has put forth a massive quarantine to prevent a worldwide outbreak. However, they have now been the source of several scourges due to the way they process and treat animals for consumption (with their barbaric live markets). civet cat (SARS), bird/swine flus, and now this new cornovirus from a live animal market in Wuhan. Unfortunately for us, what originates through their barbaric live markets can rapidly spread across the globe owing to our extensive globalized world. I’ve been to China for short work trips at least 12 times, and it is one of my least favorite places due to the severe pollution and crowds. I don’t want to see Canada get any more tied to this place than we already are (no Huawei please…).

#54 akashic record on 01.26.20 at 1:40 am

#30 oh bouy on 01.25.20 at 7:45 pm
@#13 MF on 01.25.20 at 3:48 pm
____________________________

substantially more folks will die from the measles this year.

Canadian expert, oh bouy releases death-toll prediction of the recently discovered Coronavirus on popular finance blog.

Instantly receives job offers from countries, hit by the epidemic. oh bouy issues press release: LOL

#55 Nonplused on 01.26.20 at 2:32 am

#42 leebow

I don’t know what you are trying to say but 5% mortality for a virus that can spread and has a 5 day latency period (you don’t know you are sick but are contagious) is a big deal. This virus could kill millions. And the Chinese know it, which is why they are quarantining whole cities bigger than New York.

It will probably come to nothing, as SARS did. But if it comes to something, you will be glad if you can hole up in your house for 6 months without going outside.

A 5% mortality rate is much higher than that faced by your average motorcycle rider, and yet many of you are afraid of riding motorcycles. Pandemonium will result if this thing is not contained. At this point I believe it will be contained though. Still, I am going to keep the pantry full, even though in all likely hood this is another media false flag.

#56 Shade Frank on 01.26.20 at 5:08 am

BANNED

#57 Camille on 01.26.20 at 6:55 am

So the hedge fund that you and I can invest in is probably going to not be very good. I guess that’s the point. And Warren Buffett is a value investor, not a hedge fund, just like you and I. And some drive Porsches because they deserve to while others do not.

#58 crowdedelevatorfartz on 01.26.20 at 8:20 am

@#46 TT
re Wuhan crowds.
++++

The same thing happens at CostCo in Canada when they announce a “Sale”.
A mob scene.
Now imagine a city of 11 million people and the rumours that spread faster than a virus..

One wonders how many people with the sniffles are convinced, through constant media hype, that they are dying of Corona virus…

Dont “feed” the band wagon.

The last place I would go would be a crowded hospital full of panicking people.

#59 crowdedelevatorfartz on 01.26.20 at 8:28 am

https://www.citynews1130.com/2020/01/25/woman-house-advertised-realtor-disciplined/

A $60,000 commission.
A $6,500 fine…

The lesson learned?

” I cannot trust a realtor”

#60 Yanniel on 01.26.20 at 8:46 am

#48 Yanniel on 01.25.20 at 11:36 pm
#17 Doug Rowat on 01.25.20 at 5:27 pm
#11 Yanniel on 01.25.20 at 3:38 pm

Trying to answer some of the questions for which I did not know what to say. I came across this article:

“ The Lost Decade for Hedge Funds: Three Threats”

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3501551

“And if they’re being launched (and, according to you, bought)” according to the authors these funds are still being launched, but also liquidated. The numbers have faltered by the end of the decade. Figure page 15.

“ why is the industry imploding?” The authors identify 3 factors: competition from mutual funds and other liquid alternatives, the market environment and increased regulation.

I tried to find information about the performance of these funds before this decade. I think one decade is not enough to pass sentence. Could not find any info yet.

The last decade has been hard even for well accepted factors like “value”. That’s not to say its dead. We have seen that asset classes and strategies underperform for a decade or more.

As for the future of hedge funds I don’t know. Speculating out-loud: Maybe they evolve for the better or well, die. Or maybe some sort of event (or market regime change) will make them outperform. If I only has a crystal ball.

#61 MF on 01.26.20 at 9:08 am

52 akashic record on 01.26.20 at 1:20

Yeah I read about that, not on that website though.

My thoughts are it’s a coincidence more than deliberate. I buy the story the virus originated with a wild animal at a wet market. Happens all the time in these places where humans are too close to animals. AIDS was from an animal Africa somewhere. Probably a monkey. It’s usually with birds or pigs because they are closer to humans biologically though. There is some possibility that a virus “got out” of the bio research facility in China too, but I still think that’s remote.

As for checking temperature at airports. The incubation period seems to be from 2-14 days. A person could be infected and we would never know since there are no symptoms yet. There could also be a lot of false positives too (if someone actually had a common cold, for example and had a fever from it they would be unnecessarily quarantined).

I guess we just gotta wait for more info.

MF

#62 oh bouy on 01.26.20 at 9:38 am

@#54 akashic record on 01.26.20 at 1:40 am
#30 oh bouy on 01.25.20 at 7:45 pm
@#13 MF on 01.25.20 at 3:48 pm
____________________________

you have a problem with facts?

#63 oh bouy on 01.26.20 at 9:42 am

@#44 Drinking and Smoking on 01.25.20 at 9:55 pm
#31 oh bouy
____________________________

take a good look in the mirror jack ass.

#64 Yanniel on 01.26.20 at 9:45 am

#43 Doug Rowat on 01.25.20 at 9:47 pm
#29 SoggyShorts on 01.25.20 at 7:39 pm
#11 Yanniel on 01.25.20 at 3:38 pm
Using the S&P 500 as a benchmark is unfair in my opinion. Do we compare bonds against the S&P500?
*******************
Yeah, I finally gave my advisor the boot the same week after he compared my returns (net of fees as I requested for a change!) vs bonds when my PF was 80/20.

Petr Nedved, who throughout his NHL career had a perpetually inflated sense of his own worth, was rocking about 6 goals one year in the mid-90s and demanded a trade. One comedian joked at the time, “What do they trade him for? A pack of smokes?”

Hedge funds have done 1% annually for a decade. Benchmark them against anything you want. They’re still worth a pack of smokes.

–Doug

——

Over the decade encompassing the Buffett Bet “ the Vanguard FTSE All-World ex-US Index fund generated just 1.2.”

https://investresolve.com/file/png/Buffett_bet_table2-1080×180.png

I guess the rest of the world is also worth a pack of smokes.

#65 Dharma Bum on 01.26.20 at 10:15 am

The only hedges that need funding and managing are the bushes that separate my neighbour from me.

I’m here all week…try the veal.

#66 Sail Away on 01.26.20 at 11:50 am

#61 MF on 01.26.20 at 9:08 am
52 akashic record on 01.26.20 at 1:20

Yeah I read about that, not on that website though.

My thoughts are it’s a coincidence more than deliberate. I buy the story the virus originated with a wild animal at a wet market. Happens all the time in these places where humans are too close to animals. AIDS was from an animal Africa somewhere.

———————————–

You know why that happens? It’s because humans are animals, too. Yes, It’s true.

#67 Sail Away on 01.26.20 at 11:56 am

#64 Yanniel on 01.26.20 at 9:45 am
#43 Doug Rowat on 01.25.20 at 9:47 pm

Hedge funds have done 1% annually for a decade. Benchmark them against anything you want. They’re still worth a pack of smokes.

–Doug

——

Over the decade encompassing the Buffett Bet “ the Vanguard FTSE All-World ex-US Index fund generated just 1.2.”

https://investresolve.com/file/png/Buffett_bet_table2-1080×180.png

I guess the rest of the world is also worth a pack of smokes.

———————————

It’s not about the overall return, it’s about the disparity of return.

Here was a plum tree waiting to be harvested and the hedge fund picked the leaves.

If the bet was all-world index, Buffett would have returned 1.2% … and the hedge fund? Using their performance here as an indication, probably very bad.

#68 Yanniel on 01.26.20 at 12:46 pm

#67 Sail Away on 01.26.20 at 11:56 am
#64 Yanniel on 01.26.20 at 9:45 am
#43 Doug Rowat on 01.25.20 at 9:47 pm

Hedge funds have done 1% annually for a decade. Benchmark them against anything you want. They’re still worth a pack of smokes.

–Doug

——

Over the decade encompassing the Buffett Bet “ the Vanguard FTSE All-World ex-US Index fund generated just 1.2.”

https://investresolve.com/file/png/Buffett_bet_table2-1080×180.png

I guess the rest of the world is also worth a pack of smokes.

———————————

It’s not about the overall return, it’s about the disparity of return.

Here was a plum tree waiting to be harvested and the hedge fund picked the leaves.

If the bet was all-world index, Buffett would have returned 1.2% … and the hedge fund? Using their performance here as an indication, probably very bad.

——-

I started by saying comparing returns in that way (SP500 vs hedge fund aggregate) was not a good thing in my opinion.

But to your questions:

– Buffett would had lost the bet had he used the ex-us equity index.

– He would had probably lost as well (or be very close to a match) if the volatility of the hedge funds aggregate were to be scaled to match the volatility of the SP500 over the same period. (Think about this for a second)

The first link I provided might offer some insight.

#69 akashic record on 01.26.20 at 2:49 pm

#62 oh bouy on 01.26.20 at 9:38 am

@#54 akashic record on 01.26.20 at 1:40 am
#30 oh bouy on 01.25.20 at 7:45 pm
@#13 MF on 01.25.20 at 3:48 pm
____________________________

you have a problem with facts?

What facts? LOL?

#70 Sail away on 01.26.20 at 6:07 pm

#68 Yanniel on 01.26.20 at 12:46 pm

Yanniel: ‘would have’ doesn’t exist. It either happened or it didn’t

#71 The other Doug, in London on 01.26.20 at 10:57 pm

@Ronaldo, post#22:
You obviously have a different perception of time than the rest of us do. I was in late 2014, NOT 2005 that oil prices dropped and oil companies went on sale. I had scooped some XEG when it was $8 and change, sold it off early this year for $9.56 per share when there was all that scare about a Middle East war. I bought it back at $8.70. I bought a bunch during a big sale in 2012, then sold it all off at about $20/share in June 2014. Since then I’ve bought some when it went on sale, sold it off during rallies, bought it back, and so on. And now for the punch line, I still get paid a yield of 2.88% during the times I hold this dirt cheap bargain. Do you still think hedge funds are a better investment?