.
By Guest Blogger Doug Rowat
.
Investments can go to zero.
And recognizing—really recognizing—that this can happen allows investors to sidestep two of the more dangerous investing risks: 1) overconcentration and 2) excessive optimism.
Mathematician and risk analyst Nassim Taleb once highlighted the thousand and one days in the life of a Thanksgiving turkey to frame how we should think of investment risk. The vast majority of the time, turkeys lead a great life and expect this will continue, but on that rare, dark day:
A thousand and one days in the life of a Thanksgiving turkey
Source: Bloomberg
Taleb has a related quote: “You can be risk loving and yet completely averse to ruin.” In other words, investors need to take some risk to get ahead, but a risk that can completely wipe you out is never worth taking. Yet, in my 25 years or so in the investment industry I’ve seen all-in wagers taken constantly: portfolios transferred to us that contain only a handful of junior-mining stocks, portfolios completely gutted in order to buy speculative real estate or engage in other risky business ventures (against our advice, of course), employees excessively loaded up on their own company’s stock and so on.
And, in each instance, there’s a lack of understanding of the failure probability and the ensuing consequences of that failure. There’s even a financial term traders use for assessing the odds of catastrophic loss: ‘risk of ruin’, which relates to the likelihood that you’ll lose all your capital or a large portion of it. A coin toss, for example, has a risk of ruin of 50%. Naturally, most (unfortunately, not all) wouldn’t bet all their capital on a coin toss. However, the danger comes when the odds shift, sometimes meaningfully, in your favour. Would you risk all your capital if the odds were 90% in your favour? Many would, but the answer should still be an emphatic NO because if the downside cost is financial obliteration then the risk, even at favourable odds, simply isn’t worth it.
A similar risk-reward scenario was highlighted in the recent Chicago Bulls documentary “The Last Dance”. Michael Jordan broke his foot during the 1985-86 NBA season. He wanted to return to play early, but doctors said there was a 10% chance that if he came back too soon he could end his basketball career. Bulls owner Jerry Reinsdorf wasn’t in favour of Jordan returning and presented the situation like this: “I said to Michael, ‘you’re not thinking about the risk-reward ratio’. If you had a terrible headache and I gave you a bottle of pills and nine pills would cure you and one of the pills would kill you, would you take a pill?” Jordan, of course, famously responded with “it depends how f—ing bad the headache is.” Jordan’s response has become celebrated for its bravado, but it’s actually Reinsdorf who made the correct assessment of Jordan’s circumstance and gave the right advice.
Always consider what your financial life would look like if a one in 10, one in a 100, or even one in a thousand, event were to occur. If Nortel or Enron pensioners, Bernie Madoff investors, 2018 back-up-the-truck weed-stock pickers or BC leaky-condo buyers had considered this risk in relation to their overall asset concentration they might have dodged despair. Diversification (and its related cousin, hedging) is the best way to reduce risk of ruin.
In other words, evaluate your concentration risk and the probability of downside as if you were that Thanksgiving turkey. Good outcomes always seem likely until suddenly they aren’t.
$ $ $
Finally, I frequently criticize mutual funds on this blog citing the S&P Indices Versus Active (SPIVA) research, which highlights that the vast majority of fund managers consistently underperform their benchmarks. For example, 88% of Canadian fund managers underperformed their benchmarks last year, which is in line with the 84% average over the past decade (the average is even worse for US fund managers).
The counter-argument often goes that through careful due diligence, investors can uncover the 10-15% or so of funds that have performed well for a number of years and simply invest in those. Well, SPIVA recently splashed some cold water on that theory through the release of its Persistence Scorecard.
The Persistence Scorecard attempts to determine whether a fund manager’s success is attributable to consistent skill or simply luck. Sad to say, the report concludes that “active management outperformance is typically short lived.” For example, of the 144 Canadian funds that ranked in the top quartile in 2016, just one fund remained in the top quartile annually through 2020.
One of 144. The report’s ultimate conclusion is blunt: the “notion that choosing between active funds on the basis of previous outperformance is a misguided strategy.”
Top quartile Canadian funds for 2011-15 were far more likely to end up in the bottom quartile for 2016-20 than to stay at the top.
Source: S&P Dow Jones. Data as of end-2020
Doug Rowat, FCSI® is Portfolio Manager with Turner Investments and Senior Vice President, Private Client Group, Raymond James Ltd.
81 comments ↓
What about the false sense of mid to longer term government bonds being really safe especially during the pandemic. Many bonds, bond values, bond mutual funds, bond ETF’s lost anywhere from 3% to 8% in a 12 month period.
They might of recovered a bit as in the last few weeks bond yields came down some but what happens over the next 12 months. It could easily be a repeat of average 5% to 6% losses at the minimum. This is especially true as 30 to 60 basis points higher bond yields make a big impact on lower bond prices in a very low interest rate environment. May people don’t understand this basic concept of rising rates=falling bond prices and vice versa.
Where is your sense of adventure Doug?
A person has to have some fun, even if it’s with a threadbare meagre portfolio like mine:
Credit Suisse X Links Crude Oil Shares Covered Call ETN
Just 1% for the pure exhilaration of it all.
Just balanced portofolio out for what I think it to come and Garth corroborated the day after. I believe I am pretty diversified and can check every box off from what you all have recommended in the past few months.
Much appreciated. Keep doing what you all do on this Blog, give us Plebes good investing advice.
Thank you.
—————
Almost forgot:
Italia 3 – Turchia 0
L’Italia s’è desta.
On REIT’s defected to the Americans with:
Realty Income Corp (NYSE: O)
Am I being unpatriotic Doug (Garth)? Cdn Controlled Corp Tax stupid?
I like the 90% rule they have on returning income to shareholders and they are considered a “Dividend Aristocrat” plus reasonably diversified (The Monthly Dividend Company).
Looked at the Cdn REITs, the ones that I knew something about, but seemed all concentrated around a Cdn city or two.
My bad?
i prefer the Druckenmiller method:
I’ve learned many things from him [George Soros], but perhaps the most significant is that it’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
The way to build superior long-term returns is through preservation of capital and home runs…When you have tremendous conviction on a trade, you have to go for the jugular. It takes courage to be a pig.
Put all your eggs in a few baskets, and watch those baskets very carefully.
you get the idea….
Good advice. But, no ‘risk-it’ no ‘biscuit’. Just that my risk-its are always with-in my means.
OAN – The SHOW is starting in my town. People are out in droves and you can smell the hormones. Might a good time to add some pamper and Trojan stocks to your portfolios. Lol! Roaring 20’s? Could be a baby boom, haha.
Enjoy your weekends! I sure will!!
Og
“Risk comes from not knowing what you’re doing.”
Warren Buffett
“The way to become rich is to put all your eggs in one basket and then watch that basket.” -Andrew Carnegie
Life is all about risk……it’s all risky.
Know when is guaranteed tomorrow.
So going all in on Canadian O&G would be a bad idea?
Line 3 is next target it seems…
https://www.nytimes.com/2021/06/11/opinion/keystone-pipeline-biden.html
#4 safe money? on 06.12.21 at 1:09 pm
Put all your eggs in a few baskets, and watch those baskets very carefully.
—-
Everyone watches their investments carefully, or claims to. Though how would this protect you from, say, outright fraud?
It’s the “few baskets” that’s the problem.
—Doug
It must be tons of fun trying to talk a client down off the “single investment sure thing” ledge.
Or do you deal with the messy aftermath…?
#162 Sail Away on 06.12.21 at 7:56 am
#156 NSNG on 06.12.21 at 1:20 am
@#126 Wrk.dover on 06.11.21 at 7:42 pm
Any time you need to know the name of a song, just type the lyrics into duckduckgo or google. If you put the word “lyrics” into the search it will work even better
———-
If one is busy homesteading and cruising the interwebz with a homebuilt crank-powered Commodore 64, it is far more efficient to delegate the task to tech-y whiz kids.
Well played, WO, well played.
_____________________________
The problem is, my 24/7 tinnitus is basically the same noise as the guitar @ four minutes in on IH’s U-tube version. Makes it hard for me to do much more than be mouthy, ya know (too)?
But a big thanks to Dr. V., NSNG, Billy Bob and IH as well as Garth for allowing my request to float, helping a feeble geezer looking for the right sound track to take to the nursing home for the piped in system when classic rock gets outlawed by common sense law.
I had looked for this a long time ago, I’m not persistent enough in looking repeatedly apparently. Some things get added eventually. I did find Art Bergman’s ‘Empty House’ video shortly after it was posted, after having looked previously. Learning curve issue. Yup!
Now I will go look yet again (no luck so far) for Glass Tiger singing “Look at me I’m watching worlds Tumble, I’m watching Worlds Fall!”
A great tune for the markets some days!
So Doug, if the B&D approach is to sell a few bonds during market drops to buy the dip, what is the fail rate going to look like the day the Fed stops buying every bond with ‘for sale’ marked on it?
#142 Grunt on 06.11.21 at 10:58 pm
Open competition by ending the 6 bank reign.
***********************
Why? Rates are extremely low, fees are zero if you have a few bucks in the account and having your money in a bank that is too big to fail is great. Plus it makes them excellent things to own.
What’s the upside to adding a bunch of ‘Murican banks to the pool?
History is littered with rags to riches stories. The problem with those stories is they tend to end once the riches occur. If you follow the story to the end it usually ends with rags.
Look at the investor that got up to $10 billion and lost it all during the market meltdown when covid first hit.
Vegas has good ones too like the dishwasher that went on “the run” he got up to $50 million in the 80s and lost it all. When asked how he could lose it all he said how do you think I won it all in the first place?
Huge risks= huge rewards or complete ruin
Continually taking huge risk will inevitably result in ruin.
I’m not says don’t take risks.. I do… but I limit my home run stock picks to 5% of my portfolio. As my overall net worth increases the dollar amount of my home run stocks does too but the percentage stays the same. I also track gains and loses on these equities or options against the s&p returns because there is an opportunity cost of investing the 5%.
Ah yes, the risk conundrum.
A lot depends on classification of risk. Does it mean volatility? Company history? Alpha and beta in comparison to sector peers or total market? Small cap exposure to a giant market vs niche?
Without knowing the risk calculation, the ranking of funds by risk factors is almost universally misunderstood by retail investors as possibility of short term fluctuation, not acceptance of total implosion.
For example, many years back, before beginning self-directed investing, I chose a higher risk fund offered by the company RRSP provider, drawn in by outsized 5 and 10-year returns. And… kaboom! Junior oil and mining ventures, many with zero revenue and pure speculation as the sector collapsed. 63% drop in a year, never to recover. Cue intense advisor distrust, intense research/finance courses, and shift to complete self-directed control.
Reviewing the fund, it was sheer stupidity: all holdings at their ATH, leverage up the wazoo, many purely speculative based on past sector success.
Painful at the time but also an invaluable lesson.
#3 Dolce Vita on 06.12.21 at 12:34 pm
Looked at the Cdn REITs, the ones that I knew something about, but seemed all concentrated around a Cdn city or two.
My bad?
—-
There are two main concentration risks with individual REITs: geographic and real estate sub-category (an office properties focus, for example). A well-diversified REIT ETF solves both of these problems.
Btw, while the streak is impressive, I’ve always found O’s monthly dividend increase gimmicky.
—Doug
Are dividend stocks good for young people like me, born in 2000?
Doug,
Great post – thank you. Very interesting insights re: risk and long-term performance of managed mutual funds. 1 in 144 … crazy …
Would you risk all your capital if the odds were 90% in your favour? Many would, but the answer should still be an emphatic NO because if the downside cost is financial obliteration then the risk, even at favourable odds, simply isn’t worth it. -Doug
*******************************
This is at the core of advanced FIRE math. Not the sloppy 4% rule, but taking a closer look at it over longer horizons and with greater detail.
Given the current climate and my personal situation (High CAPE, suspected rising inflation rates, and a 50+ year long retirement) the 4% rule would fail 5% of the time.
This is totally unacceptable because failure means running out of money before you die and after being out of the workforce for a few decades, you cannot do much about it.
With in-depth backtesting, I found a more acceptable “Safe Withdrawal Rate” of 3.69% which, historically, has failed zero times in history.
With past performance not guaranteeing future returns, even that wasn’t enough for me. So just in case my FIRE results are the worst of all time, I beefed up the nest egg even further.
http://www.earlyretirementnow.com is the site and their calculator is here: https://tinyurl.com/4asaea7h
#12 I’m stupid on 06.12.21 at 2:13 pm
I’m not says don’t take risks.. I do… but I limit my home run stock picks to 5% of my portfolio.
********************
I’d like to do that since it seems like fun, but even a 5% loss could have a big impact.
My whole early retirement is based on getting market returns and a SWR of about 3.5%.
A few bad bets in a row could change a lavish lifestyle to a frugal one.
Doug, you are completely correct about putting all the eggs in one basket. Knew a couple (husband worked for Nortel) decades ago. Stock options, DB pension etc. – he made enough $ that she could opt to stay at home until the child was old enough to attend school. Having lost contact once I moved across country, always wondered whether he stayed with Nortel & whether its demise was a bullet they managed to dodge. Given that they had all their eggs in the Nortel basket when I knew them, could be that golden ‘ever after’ fairytale turned into a cautionary tale from Brothers Grimm.
#14 Doug Rowat
Ya I know about the gimmicky. They got me.
Come on Doug monthly nice, I hate waiting every quarter.
A part of the immediate gratification crowd here.
Still, they are the largest, +25 yr history of dividends, never missing a payment with an impressive list of customers (Walmart, Walgreens, Home Depot, etc.).
To be honest bought them for the stable dividend flow track record.
——————
MORE IMPORTANTLY, thank you for taking the time to give me some constructive feedback.
Appreciated. Why I keep coming back to this Blog day in and day out.
Never bet against America!
Wonder if that is still good advise?
After a quick start, Biden’s presidency seems to have hit Trump’s wall.
His wish list is getting smaller and smaller, filibustered in the Senate. One wonders if the States is really a democracy.
The VP is a no-show. Biden is a micro-manager.
He’s escaping to Europe, where he’s greeted with open arms.
America’s infrastructure is crumpling, but vital infra structure spending is stalled by the Senate.
China keeps on growing by leaps and bounds.
Has probably the most modern infrastructure of any major economy.
Bullet trains criss crossing the country.
How long will American supremacy last?
Just asking for a friend.
#126 Wrk.dover on 06.11.21 at 7:42 pm
Aside from that Friday night laugh, can you identify a song for me, from back in the 90’s with the chorus “I will drug you and —- you, on the permafrost”? I have it on a worn, very poorly recorded from radio-CFNY cassette, it sounds a lot like Duran Duran, but obviously is far from that. The guitar/keyboard is full on glue sniffing sound effects (guessing) with oscillating volume. From the words, obviously CDN punk supreme. I’d love to know what it is to get a better copy. And all of the material from the same band.
I sure hope you can help.
//////////////
Magazine – Permafrost
lyrics- https://www.metrolyrics.com/permafrost-lyrics-magazine.html
song- https://www.metrolyrics.com/permafrost-lyrics-magazine.html
///////////////
remember this one- The Plumber, Workforce
https://www.youtube.com/watch?v=AHFlDf3Z0TM
Talking about statistics and odds.
They say about 16% of Canadians don’t plan for retirement, because they expect to win the lottery.
Odds are 1 in 14 mill.
But as they say “if you don’t play, you can’t win”
I says: keep on paying “voluntary taxes”, we have a budget to balance.
Doug don’t get me wrong. Few single stock picks left in my threadbare portofolio.
Dumped the VAX stocks, did OK. Still holding the US Death stock (stable dividends & 1 of the 2 maxims of life) and my SK Fertilizer stock (more mouths to feed in the World, need fertilizer and its CDN).
Used the bulk of the VAX money to buy big (stable?) ETF funds like SPY and QYLD.
Paying attention to what you all have been saying the best I can afford. And of course, the odd 1% of holdings sense of adventure stock.
Now 90% ETFs (indices, prefs, int’l, etc.).
Again thanks.
#18 SoggyShorts on 06.12.21 at 2:37 pm
#12 I’m stupid on 06.12.21 at 2:13 pm
I’m not says don’t take risks.. I do… but I limit my home run stock picks to 5% of my portfolio.
********************
I’d like to do that since it seems like fun, but even a 5% loss could have a big impact.
My whole early retirement is based on getting market returns and a SWR of about 3.5%.
A few bad bets in a row could change a lavish lifestyle to a frugal one.
—————
Seems like you’re gonna spend most of you’re early retirement worrying about money.
I’d say take your chances, there are no guaranties.
Tick off your bucket list early, while you’re still in control, physically and mentally.
Good luck.
@#21 Proletariate Porkbarrel
“China keeps on growing by leaps and bounds.
Has probably the most modern infrastructure of any major economy.’
+++
Its not hard having “the most modern infrastructure” when they started from nothing 25 years ago.
A pig in the yard and a goat on the roof was considered “rich”.
And if they stop building “empty cities” the unemployment rate will skyrocket meaning …another revolution…..
Their greatest strength is their people…its also their greatest weakness.
That’s quite a knives edge for the govt to walk for the foreseeable future.
#21 Ponzius Pilatus on 06.12.21 at 2:51 pm
China keeps on growing by leaps and bounds
———-
I always find China so confusing: do they even know if the official language is Cantonese or Mandalorean?
#27 Sail Away on 06.12.21 at 3:58 pm
#21 Ponzius Pilatus on 06.12.21 at 2:51 pm
China keeps on growing by leaps and bounds
———-
I always find China so confusing: do they even know if the official language is Cantonese or Mandalorean?
——————
Well, at least most of the blog dogs here know the answer.
Thanks to my thankless, studious efforts to educate the unwashed masses.
I’m sure, the Chinese will catch on soon, too.
Fast learners.
#9 Wrk.Dover
I love this one from Art Bermann, check it out:
https://www.youtube.com/watch?v=wkhzEVw3nEg
BerGmann, LOL!
#15 Gen Z on 06.12.21 at 2:22 pm
Are dividend stocks good for young people like me, born in 2000?……….…
///////////////////
Yes and no. It would have been better if you were born in ‘99 or ‘01
@#29 Pedants pontificating…
“Thanks to my thankless, studious efforts to educate the unwashed masses.”
+++++
We prefer our brains unwashed…
Risk and the problem with people whom start with money. (inheritance)
While I support the meritocracy idea of Capitalism\Free Markets. I.e. The hard worker, smartest etc. win big. I do not like the aspect that those that come to the table already rich find it easy to win though no merit. (birth lottery)
I know this situation:
Investor A has $1 Million
Investor B 10 Million
Investor B can take more risk:
– Put away 1 Million in safety so they will never eat cat food.
– Send 8 Million on B&D portfolio
– Use the last million to speculate on AMC, BitCoin etc.
Even should we hit great depression, they have a stash and are set for life. While they may risk money they are not risking bankruptcy.
If Investor A follow the same allocation, the $100,000 in safety really will not prevent Cat food consumption in their old age.
As Garth says unless you are in the Seven figures do not take on individual stock risk, Quantity of capital has a certain quality inherent to it.
Property Owing Democracy of Landed Aristocracy?
https://www.youtube.com/watch?v=7hn2b5-50go
While I don’t disagree with anything in anything in your post, I also agree with the proverb “don’t look a gift horse in the mouth”. Oil was trading at zero a year ago, talk about the buying opportunity of a century. Why wouldn’t I go overweight on oil stocks?
Now, let’s talk turkey. My most rewarding experience as a hobby farmer was raising turkeys. I did small batches of a few dozen, 100 days from start to finish, and if you seen the way they eat this wouldn’t surprise you. Nothing beats sitting out on the lawn chair with a cold one watching these birds in action. If anyone has a small shed, downwind of your house and your neighbors, I highly recommend trying to raise a rafter. And never mind what Warren said about them, “If you want to soar like an eagle in life, you can’t be flocking with turkeys”, I think you can do both.
22 Ponzie – I find infrastructure the most compelling argument for the application of MMT. In her book “The Deficit Myth”, Kelton notes the artificial constraint of the budget vs the actual capacity of the economy. Infrastructure has benefits throughout the economy, and has lasting value. Get it built, print the money to pay for it, and have an efficient tax regime to compensate for whatever portion is required.
Warren Buffet gets preferred treatment by his banker buddies, US Federal Reserve and government gives taxpayers money for his business deals and he wants to talk about risk. I was not born yesterday. It is massively rigged and in his favour.
Now that everyone is playing a music its time to put on noise canceling headphones, or crank volume up.
https://www.youtube.com/watch?v=P8JEm4d6Wu4
https://www.youtube.com/watch?v=P8JEm4d6Wu4
#26 Ponzius Pilatus on 06.12.21 at 3:09 pm
#18 SoggyShorts on 06.12.21 at 2:37 pm
#12 I’m stupid on 06.12.21 at 2:13 pm
Seems like you’re gonna spend most of you’re early retirement worrying about money.
I’d say take your chances, there are no guaranties.
Tick off your bucket list early, while you’re still in control, physically and mentally.
Good luck.
***********************
You’ve got it backwards: Having a solid plan and being flush is precisely why I don’t have to worry about money in retirement- that’s the whole point.
Plan for the worst (and then some) and you won’t be disappointed.
It’s the “Lean fire” crowd who scares me: they are one miscalculation or black swan or whatever from disaster.
I am sitting at just past 50% above what I thought I’d need to retire (Fat Fire), so I’m ready for that bucket list… just need a “vaxport” or something since most of the list isn’t for things in Canada.
@#36 DrV
“Infrastructure has benefits throughout the economy, and has lasting value. Get it built, print the money to pay for it, and have an efficient tax regime to compensate for whatever portion is required.”
++++
Optics…
While I agree that Canada’s infrastructure is woefully decrepit( and getting worse) in most regions of Canada.
Our Prime Minister( and most of our populist, pandering, apologists in power ) would rather stand on the smashed, decapitated statues of our forefathers OR a newly painted public school rainbow crosswalk…. for a “presser” on the 6pm “news” pablum
The electronic version of a photo op.
Than pose in front of a new, environmentally friendly Sewage treatment plant, highspeed Railway, oil pipeline, highway, whatever …
@#37 Don Sampson
“It is massively rigged and in his favour.”
+++
I’m quite positive about two things.
1. Mr Buffett can afford the best accountants and tax lawyers in the world.
2. If Don Sampson owned and ran Berkshire Hathaway… he’d do the exact same thing….
Been there, done that. Speculation that is. When to buy, when to sell, always figuring the bet is a sure thing. Wrong…
Acknowledging ones weaknesses and correcting this faulty behaviour is a step some still refuse to deal with. Systemic risk owning the major indices is far more palatable than sweating bullets. Choices…
“Born south of the Mason-Dixion.
Sugar and spice so sweet, make him pay attention.
I’m a freak in the sheets, bake in the kitchen.
I told him if you bring the meat, I got all the fixin’s”
LoL!
“Country Girl”
https://www.youtube.com/watch?v=E-cdbb6tVJI
Dexter’s a 10/10!!
40 Fartz
Yep.
So we should buy puts on the turkey?
——————————–
There is something called “survivorship bias” in hedge fund traders and fund managers. Taleb has spoken of it extensively. The idea goes something like this:
Imagine there are 1000 traders, each trader has a penny, and each year the pennies are flipped. Heads the trader wins and and move on, tails the trader loses and the trader leaves the game. After the first flip (year), roughly speaking, 500 traders will leave and 500 will move on. After 2 flips (years) there are 250 traders left, then 125, then 75, then 38, then 19, and so on. After 10 years there will still be one trader left who has never lost a coin toss. This guy is collecting some big bucks, but he still has a 50% chance of losing a toss each and every year, both in the past and in the future.
To make matters more complicated, all the traders that leave the game are replace each year by new traders so there are always up and comers. But it helps to follow just one cohort to see what’s going on.
#34 Dogman01 on 06.12.21 at 5:27 pm
Risk and the problem with people whom start with money. (inheritance)
While I support the meritocracy idea of Capitalism\Free Markets. I.e. The hard worker, smartest etc. win big. I do not like the aspect that those that come to the table already rich find it easy to win though no merit. (birth lottery)
—-
So you’re saying the world’s unfair? What a revelation.
—Doug
#22 Ponzius Pilatus on 06.12.21 at 2:51 pm
Never bet against America!
Wonder if that is still good advise?
After a quick start, Biden’s presidency seems to have hit Trump’s wall.
His wish list is getting smaller and smaller, filibustered in the Senate. One wonders if the States is really a democracy.
———————————
It never was a democracy. It is a republic. There are many differences, the primary one being the checks and balances to prevent “mob rule” by the majority. This is why all states have the same number of senators. Otherwise the smaller states would never have joined the union (unless by force).
It is also why the electoral college is used to elect the president rather than the popular vote. Even back in the early days when most of the population was on the east coast and California wasn’t really a thing yet, it was recognized that smaller states were not going to join if they didn’t have a say in electing the president due to shear population numbers in the founding colonies.
Individual states are democracies to some extent, but the United States is not. It never was. It is a republic.
The Canadian Senate, on the other hand, is much more based on population with Ontario and Quebec pretty much running the show. It is still meant as a check on elected officials though. But it pretty much reinforces the idea that in Canada all policy is driven by these 2 provinces. They have 48 of the 106 seats.
#37 Don Sampson on 06.12.21 at 6:19 pm
Warren Buffet gets preferred treatment by his banker buddies, US Federal Reserve and government gives taxpayers money for his business deals and he wants to talk about risk. I was not born yesterday. It is massively rigged and in his favour.
———-
1. Recognize that odds are rigged in Buffett’s favour
2. Buy Berkshire stock and return 41% in the last year, 30% YTD
If the steps above are unclear, I am happy to answer any questions.
#34 Dogman01 on 06.12.21 at 5:27 pm
Risk and the problem with people whom start with money. (inheritance)
While I support the meritocracy idea of Capitalism\Free Markets. I.e. The hard worker, smartest etc. win big. I do not like the aspect that those that come to the table already rich find it easy to win though no merit. (birth lottery)
I know this situation:
Investor A has $1 Million
Investor B 10 Million
———————————–
What is the alternative? There is already a significant “death tax” (capital gains) but if we change the rules so there in no inheritance, what happens to the incentive for people to succeed? Are you really willing to keep working after you have $10 mil in the bank for the benefit of everyone else’s children or would you rather just retire?
And “birth” isn’t a lottery. Who you end up being is highly dependent on the genes you have and your upbringing. One of the big differences between rich parents and poor parents is that rich parents tend to spend a lot of time talking to their children about money, something that poor parents do not tend to do. (Probably because they don’t know anything about it).
Ya, rich kids get a head start. And some of them blow all the money on wine, women, and song and waste the rest, but some of them continue the family business and create dynasties.
Now that my rainbow has been culturally appropriated, am I allowed to use floods to express my wrath again?
Hmmmm
Once again, the Mandarins in Ottawa are completely oblivious to the economic ramifications of ignoring the US govt.
The pithy amount of non consequential Parliamentary seats afforded to Western Canadian voters means…BC is an election backwater to the Ottawa majority seat mindset.
https://nationalpost.com/news/world/canadas-4-2-billion-cruise-industry-risks-being-permanently-decimated-by-proposed-u-s-law
A multi billion dollar economic kick in the teeth if this US Law becomes permanent.
Which I suspect it will.
Bye bye Cruise ships and the Billions of $$$$$….Billions of $$$$$….. the foreign tourists spend….. because Trudeau stuck to his Covid rules and wouldnt budge.
No Cruise ships until 2022 sez Trudeau?
I guess all those covid testing kits languishing in govt warehouses are too precious to use?
God knows , after 1.5 years of Covid I could count the amount of people I know that have been tested at about 5….
Perhaps the govt tax money shoveled out of the Federal dump truck into the Deficit bonfire will be even less in the next few years?
Not to worry, the rainbow crosswalks will always get a fresh coat of paint.
I’ve scrolled up and down several times but I still can’t find the dog. Is it just me?
@#52 Ken
“I’ve scrolled up and down several times but I still can’t find the dog. ”
++++
It’s “dogless” Saturday.
Not to be confused with Godless Friday night.
OR
Sinful Sinan Sunday.
#23 Penny Henny on 06.12.21 at 2:53 pm
remember this one- The Plumber, Workforce
https://www.youtube.com/watch?v=AHFlDf3Z0TM
_________________________________
I hadn’t heard that one. Sounds like the band FM meets Saga. I landed down east in 79, but recorded CFNY, commercials and all on cassette every time I visited Ont. after that.
That was before SW NS had any FM stations on the dial, only two TV stations, and before my 10′ home dish was available. My greatest regret of migrating here by far, was just that, leaving CFNY behind.
I have a circle of friends within a mile of you in SW Welland. Always a radio sound track playing when I visit them. Never anything unidentifiable unfortunately.
____________________________
#30 Cici on 06.12.21 at 4:59 pm
#9 Wrk.Dover
I love this one from Art Bermann, check it out:
https://www.youtube.com/watch?v=wkhzEVw3nEg
__________________
Right at the close, he does that haphazard pick hand stall/crank that is the hook for me. He’d be awesome, not playing for a recording exec man, just playing.
Soggy Shorts
I’m not saying lose 5% and continue to invest 5% until there is nothing left. I don’t even take home run shots very frequently. But if the stars align I take a shot but never more than 5% of the value of my portfolio. This keeps me honest and limits my loses. If the investment pays off the money goes into my portfolio and I rebalance. Again as I age the shots become fewer and further in between.
For you looking to retire I wouldn’t suggest taking more risk than you need to. Remember net worth is just a number what one needs to be happy varies between individuals.
I thought of early retirement but I’m anchored. I’m a father, soon to be of 2. All children need is time, love and stability and I’m going to try my hardest to give them that. So I can’t realistically jet off to exotic destinations, the kids are going to be in school.
I hope you enjoy your retirement. Keep yourself employable in case you get bored. I took 2 months off when covid hit and I thought I was going to go crazy. I still need the grind I have too much energy to stop. Plus my job is physical so I get exercise and I make my own hours, usually 4-5 hours a day. It’s a perfect work life balance for me. Hopefully you’re different.
NonPlused, I’ve been meaning to ask you this.
These people that make scads of millions of notational dollars yearly, whom you believe owe no taxes on the gain not yet realized, why do they have ever larger lines of credit available to them than I?
Is it something about money they ‘have made’, or just because I ask such stoopid questions?
#44 Dr V on 06.12.21 at 7:23 pm
40 Fartz
Yep.
——————
Than pose in front of a new, environmentally friendly Sewage treatment plant, highspeed Railway, oil pipeline, highway, whatever …
————————-
But how are we gonna pay for all this needed infrastructure?
————-
Higher taxes.
Yep
#52 Ken on 06.12.21 at 8:27 pm
I’ve scrolled up and down several times but I still can’t find the dog. Is it just me?
—————-
Same here.
But then I found the Westminster Kennel Dog Show on TV.
All good
#47 Nonplussed
America is not a Democracy.
It’s a Republic.
Exactly, that’s what is wrong with it.
One “pig squeak” ( thanks P.E.T.) can hold the whole Congress hostage.
The problem with the can’t beat them join them motto is Warren Buffet and many companies like him has special share options and can sell anytime way before things go bad.
The little pathetic shareholder is always left holding the bag. Warren Buffet and others like him got rich on the little shareholder which is always at a disadvantage.
A better system for the small investor would be a credit union like model which gets profit sharing for it’s own members. The rigging of keeping very low ridiculous interest rates and high taxation on interest, investment income also is destroying the strong incentive of saving and strong work ethic that in turn boosts savings.
We should have at least to start 5.5% interest rates on savings, deposits, term deposits and higher deposit insurance limits, guarantees. The banks, financial institutions, lenders in Canada are not limited to $100,000 or $250,000 per loan applicant.
RRSP’s should be more flexible as they should be able to be used for more retirement expenses like medical, home care, other living assistance, home renovations for disability retrofits etc. with a low flat tax of maximum 15% at most on the first $20,000 a year.
TFSA’s should have no limit but then you can’t have your old age, federal supplement pensions and other low income benefits either when you are 65. This would truly help bring Canada into a saver, more wealthy nation like back in 1990’s it hit 18% savings rate and not this huge debt ridden society we have today.
Dr V it is all BS. Stop listening to scholars and professors and speak to real people that lived through many examples of money printing, money devaluation, money debasement, high taxation, confiscatory rules, laws, high inflation etc. from Venezuela, Argentina, Zimbabwe, Brazil, Chile, Mexico, Greece, USSR etc.
I know many people who lost everything because of government corruption, tyranny and government recklessness. Once they start it is too late to back out. You are playing with fire.
Global index investors, all cap, by market cap, are the benchmark.
Mutual funds it seems are designed to outperform those of us in this camp and fail miserably. Incompetence runs deep and don’t get me started about the fees.
This is always most amusing. Homework pays for those that wanna play this game.
Antifragile was a great read. haven’t got around to black swan yet.
I’ve learned that lesson more than once in my investing career…lots of -100% in my portfolio…
I still have my Nortel shares for whenever I think I’m the smartest guy in the room…
I have this blog to thank for getting me back on the right track!
Party on Garth!
Ian there some good ideas but I think we need savings bonds back again, Canada, Ontario etc. This time 10 to 30 year terms would be good for RRSP’s, TFSA’s, RESP’s, RDSP’s, RRIF’s. We need savings bond rates like back in the early to mid 2000’s of 4.5% to 6.5% to make that compound interest really grow.
#15 Doug Rowat on 06.12.21 at 2:18 pm
There are two main concentration risks with individual REITs: geographic and real estate sub-category (an office properties focus, for example). A well-diversified REIT ETF solves both of these problems.
Btw, while the streak is impressive, I’ve always found O’s monthly dividend increase gimmicky.
—Doug
_____________________
Gimmicky is right… But you’d be shocked to see how effective it is. To the point where people will argue that it is superior to dividend payers that pay monthly.
Did you know that they actually copyrighted their slogan…. The Monthly Dividend Company?
Hey Mark R. my uncle, aunt both retired early 56, 57 years old back in 2019 and now live off their severance and retirement packages. They worked 32 years for the same employer in delivery, trucking industry. They are taking out $32,000 a year and that will last them until their 71.
When they reach 65 CPP, OAS kicks in both giving them at least $3,100 a month. They have their $50,000 reserve cash so they are set if other expenses arise.
My uncle, aunt is very cautious when it comes to money. They split their $1.2 million in RRSP’s and TFSA’s between 3 credit unions, 2 banks 3.5%, 3.45%, 3.75%, 3.6%, 3.6% 5 year GIC compounding rates.
Over the next 5 years they are quite content with the $232,122 compound total interest they will accumulate with their RRSP’s, TFSA’s. They don’t want to worry and be able to sleep at night now that they are nearing 60.
#59 Ponzius Pilatus on 06.12.21 at 9:00 pm
#47 Nonplussed
America is not a Democracy.
It’s a Republic.
Exactly, that’s what is wrong with it.
One “pig squeak” ( thanks P.E.T.) can hold the whole Congress hostage.
That’s actually a feature, not a bug. It reduces the power of the tyranny of the majority and makes sure a great portion of America is onside of epic policy changes.
If you have to use force and not convincing arguments to make changes, then you can’t even convince yourself about what you are doing.
People need to understand that the only reason pipelines are being shut down is because “uncle” Warren Buffett, a major supporter of the democratic party, owns trains and oil cars.
#59 Ponzius Pilatus on 06.12.21 at 9:00 pm
#47 Nonplussed
America is not a Democracy.
It’s a Republic.
Exactly, that’s what is wrong with it.
One “pig squeak” ( thanks P.E.T.) can hold the whole Congress hostage.
——————————-
The founding fathers would probably differ with you. They intentionally designed it not to be a democracy because mob rule always leads to tyranny. You need that one “pig squeak” to keep a check on things so they don’t just run off the rails because “everybody” thinks it is a good idea.
#56 Wrk.dover on 06.12.21 at 8:47 pm
NonPlused, I’ve been meaning to ask you this.
These people that make scads of millions of notational dollars yearly, whom you believe owe no taxes on the gain not yet realized, why do they have ever larger lines of credit available to them than I?
Is it something about money they ‘have made’, or just because I ask such stoopid questions?
——————————–
It is simply because banks will loan against equity, much as when you get a HELOC (assuming you do). Your home equity is all notional until you sell too, but banks will still lend against it.
So Musk has very little cash into his shares, but he has a lot of shares and they have gone up in price a lot, much of it not his fault just everyone pilling into the shares at any price (we have some of those people is this comments section). Thus, he has a lot of equity but as of yet no cash. The banks will lend against a portion of that. I’m not saying it’s smart, but it is what they do.
And they have recourse. If Musk doesn’t pay them back, they get the shares, just as they would get your house if you don’t pay back the HELOC. Would the shares be worth anything or just be a big bag of doggie do-do? I don’t know but they take the risks they will.
61 Rick – MMT certainly has its limitations. Realistically, about 5 countries can pull it off to any degree, maybe a
few more. None of the countries you mentioned were good candidates to begin with, either due to debts in foreign currency, economic or political instability, or lack of trust.
MMT has recently been applied throughout the world
and in Canada with COVID related benefits. However, that is an exceptional circumstance, as it was meant to lessen the projected economic loss. Looks like we may have overshot.
Perhaps Ponzie can explain the role of taxes in MMT.
To me investing is not a race, it’s more of an endurance contest where one’s portfolio chugs along hopefully up ticking over time. Last year my dividend portfolio gained 3.1% and this year (almost the same portfolio) is up 26.08%. Time in the market is just as important as picking good profitable companies that raise dividends annually. As a retiree I spend all dividends plus 2.5% every year. In 5.5 years of retirement the dividends are up 35% and porfolio is up 40%.
@#57 “Pip” Squeak Prattle
“But how are we gonna pay for all this needed infrastructure?
Higher taxes.
+++++
The federal govt should ONLY be spending on infrastructure, military/national defense, and other large national projects that individual Provinces have neither the money or the jurisdiction to implement.
Our tax dollars going to tangible improvements to the nation.
As it should be.
When they start spewing out billions on social awareness programs that are dear to the socialist heart ( re-election campaign?) with no accountability to balancing a budget.
Who gets to say “stop” when Little Potato decides he knows best and blows the doors off our national debt with ramifications your great grandchildren will have to deal with.
Unacceptable.
Thats when taxpayers should be allowed to yank the reigns of a runaway horse through referendums or a new election.
Our spineless opposition didnt voice more than a pip squeak of a protest when he started burning through billions last year from the front lawn of the “cottage”.
No votes, nothing.
#54 Wrk.dover on 06.12.21 at 8:33 pm
That was before SW NS had any FM stations on the dial, only two TV stations, and before my 10′ home dish was available. My greatest regret of migrating here by far, was just that, leaving CFNY behind.
///////////
CFNY gradually got worse and by the later 80’s it had lost what made it great.
////////////
I have a circle of friends within a mile of you in SW Welland. Always a radio sound track playing when I visit them. Never anything unidentifiable unfortunately.
///////////////
Let me know when you’re in town, I’ll meet you at Hanks’ for some beers.
Pipsqueak not pigsqueak.
Hmmm.
Like father Like son.
A Dec 23 , 1983 article from the New York Times.
Mentions a US State Dept official describing Pierre Trudeau as a “pot smoking leftist” for attempting to initiate a Nuclear Arms treaty without consulting either the US or Russia. Thus diplomatically stepping on everyone’s toes.
“The same sense of outraged self-esteem resulted in front-page articles in Canadian newspapers four weeks ago. The articles quoted anonymous United States officials at a conference on North American defense held at Americas House in New York as saying that
“Canada and its Prime Minister had very little credibility in Europe for the peace campaign because the country had not lived up to its NATO commitments.”
The reaction here to those comments, which Canadian sources attribute to Ronald S. Lauder, a Deputy Assistant Secretary of Defense for European and NATO affairs, was to rally support for Mr. Trudeau and for his plan despite United States scorn. Mr. Trudeau himself addressed the criticism in a Toronto speech a day before he met with Mr. Reagan, when he brushed aside the attacks as those of a ”Pentagon pipsqueak.”
@God
“Now that my rainbow has been culturally appropriated, am I allowed to use floods to express my wrath again?”
++++
Our profuse apologies for stealing your “thunder”.
We’ll use environmentally friendly, waterproof paint next time.
at RT June 12&13, 2021
Sitting on ‘TIME BOMB’: Deutsche Bank issues grim post-pandemic warning for US economy
https://www.rt.com/business/526382-deutsche-bank-us-inflation-crisis/
G7 nations seek to counter China’s Silk Road projects with ambitious infrastructure plan
https://www.rt.com/business/526432-g7-silk-road-rival-china/
If you absolutely MUST buy high risk investments, they should be a small part of your portfolio, like 2% maximum. Gambling is for casinos, not your retirement funds.
I buy company equity because of their reputed cash flow and dividends. It gets ugly when they fail. It can wipe out dividend income for years if not forever.
I like to keep what I get. I will change with the times but I don’t get some prices, especially on things that are supposed to be “rare”. I read that most people consider RE as a retirement fund. I am not in that camp. I don’t like being a sitting target.
I don’t get why 10 year bonds yields are falling. Seems the smart money is betting on a recession and the US$ rising. I keep my eye on employment and wage income. There are many speculative bets in the markets. Front running is losing its mojo. I don’t play against big money. I might as well serve my ass on a platter. I go to fields where they are not but sometimes it is good to run with the herd.
This is the best thing I’ve read.