Meteors

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DOUG  By Guest Blogger Doug Rowat
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A few weeks ago, after a whopping 40 drawings, some lucky individual finally won the US Powerball jackpot of almost US$700 million.

The massive jackpot had been growing steadily since early June and eventually ranked as the seventh largest lottery jackpot of all time. As MarketWatch reported, the jackpot-winner drought (thus dollar buildup) was by design: massive jackpots draw more players even if the odds don’t warrant participating. Your chances of winning that particular Powerball? About 292 million to one. Statistically, you’re actually more likely to be hit by a meteor (about 75 million to one).

More on that later.

Lottery techniques, however, have application to my industry. Big returns and huge outperformance are often promised by financial advisors leading investors to disproportionately focus on these ‘jackpots’ rather than on the long odds of actually achieving them. Sadly, our basic human nature gets exploited: people are more likely to chase a big prize they have little chance of winning as opposed to a smaller prize that’s more attainable.

People much smarter than me have studied this human tendency of ours. Collaborative research at UK and Australian universities in 2005, for instance, showed that the most effective form of incentive was one that promised a bigger prize. When given the choice of a lottery that paid off with one bottle of champagne versus one that paid off with six bottles of champagne, more chose the six-bottle payoff, even though the odds were much longer. In the end, the researchers concluded that “one big prize improves [response rates] more than many small prizes despite the lower odds of winning.” To our detriment, our mind anchors on the prize rather than the odds of achieving it.

While salesmen in the investment industry constantly brag about beating benchmarks, it’s extremely difficult to do so. I’ve frequently highlighted, for instance, the extraordinarily low percentage of active fund managers who beat their benchmarks. The latest data from SPIVA shows, as just one example, that Canadian fund managers have underperformed a blended Canada, US and international benchmark 96% (!) of the time over the past decade:

% Canadian-focused equity funds underperforming benchmark

Source: S&P Indices vs Active (SPIVA); blended benchmark: 50% S&P/TSX Composite + 25% S&P 500 (CAD) + 25% S&P EPAC LargeMidCap (CAD); data as of June 30, 2021.

It’s a shockingly poor track record. However, what I haven’t addressed in the past is WHY it’s so difficult to beat a benchmark. Certainly the high fees fund managers charge are a contributing factor, but it goes beyond this. Beating a benchmark requires consistently picking a very small percentage of outperforming stocks in an index universe. It amounts to threading a needle.

Let’s take the Russell 3000 Index as an example. The Russell 3000 is a broad-based index made up of both large-cap and small-cap US companies. JP Morgan research has noted that only a very small number of ‘mega-winners’ actually drive the performance of the Russell 3000 (which has produced roughly 16% annualized total returns over the past decade). But owning these mega-winners is tough. In the case of the Russell 3000, mega-winners over time only comprise about 10% of the Index.

And middle-of-the-road stock picks don’t favour money managers: the median Russell 3000 stock has actually underperformed the Index over the past 40 years. To meaningfully outperform, you have to hit the mega-winners, but they’re few and far between.

Think of the chart below as a ledger split down the middle at the 0% mark. Look where the blue columns are weighted: a random portfolio managers’ stock picks are, in aggregate, much more likely to fall on the negative, underperforming left side:

Distribution of excess lifetime returns on individual stocks vs Russsell 3000, 1980-2020

Source: JP Morgan

Note also the extreme ends of the distribution curve: you’re more than twice as likely to pick a total dog (-70% or worse relative performance) than a mega-winner (+70% or better relative performance).

Forbes journalist John Jennings also added to the ‘alpha’ (i.e., outperforming a benchmark) conversation last year by highlighting the difficulty of beating the other big equity index, the S&P 500. Again, the odds of outperforming are massively stacked against money managers:

…for the 20 years ended 2019, 74% of stocks in the S&P 500 under-performed the average and year-to-date in 2020 (thru 8/26), 68% have under-performed. The safest way to avoid an under-performing portfolio is to own funds that include most or all of the stocks in the index, such as index funds.

So, an advisor may come to you promising fantastic returns and spectacular alpha, but this is the equivalent of the Powerball prize. In other words, you’re being manipulated. The advisor is betting that you’ll focus on the prize itself and neglect the actual odds of him or her being able to achieve it.

Never be lured into playing a game where the odds are stacked against you.

Unless you’re Ruth Hamilton. With her recent luck, she should play lotteries all day long.

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

 

117 comments ↓

#1 Open Source on 10.16.21 at 10:15 am

Open letter to Ontario Premier.

https://www.cardus.ca/article/we-ve-got-better-options/

#2 Flop… on 10.16.21 at 10:20 am

If I win the lottery and then get struck by a meteor, overall my wife would probably still be happy…

M47BC

#3 Paddy on 10.16.21 at 10:21 am

Another great article Doug.
Thanks for the reminder that trying to beat the market is a losers game. I’m always amazed at the stats of how many managers fail to beat the benchmark.

#4 Ben Allan Rafuse on 10.16.21 at 10:40 am

Sadly, our basic human nature gets exploited: people are more likely to chase a big prize they have little chance of winning as opposed to a smaller prize that’s more attainable.
—————–
A few years back my co-worker and I were looking at a penny stock that was selling for 15 cents. When it hit 22 cents he invested $22 k in the stock, and I too invested a smaller amount. When it hit $3.00 I walked into his office and discussed selling at least half of his holdings. He told me it was going to $10 and he wasn’t selling a single share until it did. It hit $4.80 briefly and went back to zero in weeks. He never sold a share. He left work shortly afterwards. Haven’t seen him since.

Lots of stories like that in the gold mining town I grew up in.

#5 crowdedelevatorfartz on 10.16.21 at 10:43 am

Yes!
4 trillion to one.

Time to buy a ticket because if you dont…. your chances are even worse…….

#6 the Jaguar on 10.16.21 at 10:47 am

Speaking of windfalls…..

NP Snippet – RBC head McKay opinion versus the Tiffster ( BOC head Tiff Macklem)–

“How are you going to spend your pandemic savings? Think carefully. The answer should inform the path for interest rates, but the two most important figures in Canadian finance disagree on how you’ll respond:

David Mckay, chief executive of Royal Bank of Canada, the country’s biggest lender and second-biggest company by market capitalization after Shopify Inc., thinks we’re on the verge of an epic shopping spree.
Tiff Macklem, the Bank of Canada governor, concedes that possibility, but thinks it’s more likely a shellshocked nation will use most of its excess cash to save, invest and pay off debt.

But the crux of the debate is about whether a crisis unlike any of us has ever experienced has altered our propensity to spend. Households were sitting on savings of $208 billion in the second quarter, compared with $17.9 billion in the second quarter of 2019, according to Statistics Canada data.

“The debate between central bankers and CEOS is how fast does it get spent and where does it get spent,” he continued. “Most central bankers think it is going to be a decade and that it’s largely going to go to pay down debt first. Corporate CEOS think it’s going to get consumed and, therefore, create demand. The balance between those two worlds, I think, is one of the biggest drivers of where you come out on the inflation argument and the (economic) growth rate.” (Mckay)

The central bank’s first post-pandemic outlook predicted that very little of Canadians’ excess savings would find its way into the economy through consumption. Policy-makers later adjusted that view somewhat in July, predicting that 20 per cent of savings would be spent buying goods and services, while the rest would be used to pay off debt, purchase homes and invest. (Tiffster).

An upward revision on spending could force the Bank of Canada to raise interest rates sooner than planned. If evidence starts to show that we’re as materialistic as we were before the pandemic, it might be a good idea to factor higher interest rates into your spending plans.+++

Ladies and gentlemen, step up to the table and place your bets. Will it be on the ‘Academic” or the “Ancient Warrior”? There’s a saying that goes “Never bet against America”, but on this side of the border one might also say ” Never bet against the Ancient Warriors (Big 5). For that reason and given what we know about the greed, lack of discipline and immediate gratification tendencies of our fellow human beings, I place my bet on David McKay as the best horse in the race. Amen.

#7 Danger Dan on 10.16.21 at 10:55 am

I’ve picked some losers but some winners too.

I hate the losers because they sit there in my portfolio, taunting me.

I hate the winners, too, because there’s no telling when they’ll stop being winners.

Supermarkets have been a good buy though. They pay dividends and hold steady on value.

If we’re going to stick to index funds though, why not just go all in on NASDAQ 100? YoY it seems to yield the most growth and although the collapses are epic, the rebounds seem to make up for it.

#8 mark on 10.16.21 at 10:55 am

I guess warren buffet is just special?

#9 Cowtown Cowboy on 10.16.21 at 11:12 am

Oil going to $100+, gotta love it, filling up the new Tundra, not so much…but all my O&G stocks are Uppa Uppa Uppa! finally got the portfolio into 7 figures, hopefully it won’t by cat food in retirement

Now for a final rip down to my favorite jerkey store, nothing but Premium in the Harley

#10 earthboundmisfit on 10.16.21 at 11:23 am

I’ve yet to find a better definition of a lottery than “a tax on the stupid”.

#11 Doug in London on 10.16.21 at 11:28 am

What would I ever do with $700 million? I’m not a lottery player, but if I was then I would rather buy a ticket where there are 700 prizes of $1 million each.

#12 DonM on 10.16.21 at 11:33 am

…for the 20 years ended 2019, 74% of stocks in the S&P 500 under-performed the average and year-to-date in 2020 (thru 8/26), 68% have under-performed. The safest way to avoid an under-performing portfolio is to own funds that include most or all of the stocks in the index, such as index funds.

—–Does this include dividends?

#13 Daniel on 10.16.21 at 11:35 am

#106 Common Sense on 10.16.21 at 10:16 am (yesterday)

“Daniel got it right, EXCEPT, in his most recent example with $50 houses the assumption is that home ownership costs = rental costs. That’s debatable, but changes to monthly input costs likely wouldn’t affect the outcome materially.” – referring to post 94 yesterday.

You’re right that ownership and rental costs aren’t usually equal, but the purpose of the example wasn’t to use exact real world costs, rather nice round numbers that were easy to track so that people who were struggling with the concept could follow it through and see how a correct comparison works.

The point being to show that the renter/investor can only use the free cash he has over and above what the owner doesn’t have to fund his investment portfolio for comparison purposes. In the example, the renter/investor started with only $8 extra to invest.

#14 Kerry on 10.16.21 at 11:35 am

I am the opposite of what your blog is about today. I never like taking high risk in my life as it never worked out for anyone in my family. They have lost houses, businesses and even careers making alot of bad moves, decisions. I can’t deal with losing money in my account when it took me years to work and save for it.

I rent and work full time and my salary is $64,000 a year. The only way I saw fit being ahead financially since I moved out of my parents apartment 10 years ago is putting as much money into my RRSP, TFSA. I save alot, it varies by year but my lowest was 35% and my highest was 45% of my gross income. My RRSP gives me a good income tax refund each year which I use to built up my liquid account for emergencies, quick access to $35,000.

My RRSP, TFSA is $208,000 today and all in GICs with my credit union. I made mostly a 3% rate over the 10 years. I am debt free and I don’t care about comparing myself to my family and friends but this is just me and what I am comfortable with.

#15 IHCTD9 on 10.16.21 at 11:48 am

#86 Dr V on 10.15.21 at 11:07 pm
66 IHCTD9

“– thank you for that well written reply, but sorry, I am not getting it, at all.

At least one of our underlying assumptions is at odds.

In your $728k of “inputs” to be “fair”, the homeowner pays back the $400k he has borrowed.”

He would get all that back again (and then some) when he sells the place for 1.1M along with the DP.

“Where does the renter get the 728K? Where is his rent in the calculation?”

The scenario was that the homeowner and investor paid into their investments monthly, so to make things easier, I propose the assumption that both have the income to feed them.

About 500 posts ago, I broke the 728 down to 6067/month, then knocked 1300/month off for rent, then ran the numbers. They were within 50k of each other iirc.

#16 mitzerboyakaQueencitykidd on 10.16.21 at 11:52 am

Dogs are great
beer is good
but you gotta have a ticket to win
lol

#17 Damifino on 10.16.21 at 11:55 am

I once had a co-worker who didn’t want to join the office 6/49 lottery pool, siting most of the points presented in today’s post.

After much goading, he agreed to join but he insisted on picking his own set of numbers. He chose 1,2,3,4,5,6.

That angered a lot of folks who though he was being a poor sport by picking numbers “with obviously no chance of winning”. He argued that his numbers had precisely the same chance as any other random sequence. That fell upon deaf ears.

Yes, I suppose he was being a bit of smart-ass, but he certainly was correct. People generally detest that attitude when it flies in the face of their superstitious numeric beliefs.

#18 Dolce Vita on 10.16.21 at 11:57 am

Off topic Doug, if you will permit me.

Many here, including me, like to compare RE from other countries to Toronto, Vancouver, etc.

Well here is 27:43 min of humiliating RE (to Cdns) across many countries and oceans:

“What $1 Million Buys You In Real Estate Around The World”

https://www.youtube.com/watch?v=Bc1wMLNd-w0

As sardonic as it gets by “BE AMAZED”, 9M subscribers.

———————

If ever in doubt that Cdns have a RE disease this video chisels that meme into stone tablets delivered from Mt. Sinai.

WFHers, look at some of the places you could be living in instead of freezing your banachas off this Winter in Canada (or waterboarded on the West Coast).

#19 Doug Rowat on 10.16.21 at 12:02 pm

#8 mark on 10.16.21 at 10:55 am
I guess warren buffet is just special?

—-

His US$100 billion net worth proves it. But Buffett has frequently highlighted the value of ETFs.

—Doug

#20 Ponzius Pilatus on 10.16.21 at 12:07 pm

I managed the office 6/49 Lotto Pool for 6 years for about 50 people.
Five buck each week. 250 each week. 13,500 per year.
81,000 over 6 years.
I think we totalled about 1k in winnings.
Too bad for me because I planned on absconding with any winning over 500 k and join my friend Jonny G. In Mexico.
And by the way, a women in BC had a meteor piece coming thru here roof and hit her bed.
She won the lottery by not being in her bed.

#21 Do we have all the facts on 10.16.21 at 12:07 pm

Speaking of the impact of large lottery jackpots on the human psyche is it possible that the decision to increase the money supply in the US by $4 trillion contributed to the recent popularity of investing in the S&P 500.

When the real rate of return realized through the purchase of bonds became negative the returns being generated by the S&P 500 became irresistible to investors around the world.

The senior management of corporations within the S&P 500 became less interested in the actual performance of their companies and began to focus on ways to increase the price of corporate stock. QE made equities the shining star of the investment world. As the price of equities increased revenues were used to increase dividends or to repurchase corporate shares. As share prices escalated investment in the S&P 500 became even more attractive.

A lottery where every ticket guarantees more than the purchase price is bound to become popular. The current popularity of the S&P 500 seems to be based on rates of return on investment generated by the ever increasing price of corporate shares not on actual corporate performance. When average P/E ratios within the S&P 500 double in 12 months it is definitely not a sign of strong economic growth.

My concern is that the recent focus on increasing share prices is directing investment away from R&D, capital investment, increased employment and the expansion of markets.

Throughout history there has always been a logical relationship between economic growth and increases in the value of corporate stock. During the last 12 months logic seems to have have flown out the window in a search for the biggest prize.

As QE is phased out the rates of return on fixed income options will improve and the price of corporate shares will move back towards their intrinsic value. Hopefully corporate management will revert to using an appropriate portion of their profits to stimulate economic growth.

Moths are always drawn to the brightest light and most humans find themselves drawn to the biggest prize.

Chasing the biggest prize is never without risk.

#22 Ponzius Pilatus on 10.16.21 at 12:09 pm

10 earthboundmisfit on 10.16.21 at 11:23 am
I’ve yet to find a better definition of a lottery than “a tax on the stupid”.
——————
Voluntary tax.

#23 Doug Rowat on 10.16.21 at 12:20 pm

#12 DonM on 10.16.21 at 11:33 am
…for the 20 years ended 2019, 74% of stocks in the S&P 500 under-performed the average and year-to-date in 2020 (thru 8/26), 68% have under-performed. The safest way to avoid an under-performing portfolio is to own funds that include most or all of the stocks in the index, such as index funds.

—–Does this include dividends?

—-

Irrelevant. Jennings is only talking about relative performance. And I seriously doubt he would give one side credit for the dividends and not the other.

—Doug

#24 crowdedelevatorfartz on 10.16.21 at 12:23 pm

@#110 faron

“You woke up on the wrong side of the atmospheric river this morning. Sheesh.”

+++

Actually I enjoy the rain.
Going for a bicycle ride later.

I wonder how many protesters will show up at Trudeau’s apologyfest next Monday in Kamloops.
Or have we renamed the town Tk’emlu’ps yet?

#25 Shawn Allen on 10.16.21 at 12:34 pm

Sitting on Savings? What am I missing?

#6 the Jaguar on 10.16.21 at 10:47 am noted:

Households were sitting on savings of $208 billion in the second quarter, compared with $17.9 billion in the second quarter of 2019, according to Statistics Canada data.

David Mckay, chief executive of Royal Bank of Canada, thinks we’re on the verge of an epic shopping spree.

Tiff Macklem, the Bank of Canada governor, concedes that possibility, but thinks it’s more likely a shellshocked nation will use most of its excess cash to save, invest and pay off debt.

******************************
I have seen where corporations are also “sitting on excess cash” as well – towards $200 billion I recall.

Okay so where did the money come from?

If you understand banking I think you will agree it came from borrowed money. The government has borrowed several hundred billion and sent it out to businesses and corporations. Businesses have also borrowed and were encouraged to do so with programs where some of the loan will be forgiven.

Borrowed money does not go into paper cash and disappear or even go under mattresses. Almost all of it stays in bank deposit accounts. That’s why there is excess savings.

And when those savings are “spent” by one person or corporation they will still show up in another (usually a corporation) bank account. Excess household savings cannot possibly be drained by spending. But they could get transferred to corporate accounts.

It is only debt repayment that makes deposits disappear from the system and can drain away the “excess” savings of corporations plus households.

IF RBC’s CEO were right we can have a process where this household excess savings ricochet around but never dissipate when you include the corporate excess which would grow..

The Bank of Canada head is probably more correct that much will go to debt repayment.

Probably a combination of both.

But my head scratcher is why a bank CEO or Bank governor is talking about excess savings when they would know it was an inevitable result of borrowing, especially the massive government borrowing.

#26 Sail Away on 10.16.21 at 12:37 pm

#184 Linda on 10.15.21 at 9:42 pm

Not always true, Sail Away, yes registered accounts are powerful tools but the TFSA is tax free unlike the RRSP. You also needed non-registered money for keeping taxes lower and more options than just be stuck in all registered accounts, especially an RRSP. I read alot of yours and the other posters but I still don’t see any of your numbers where they came from and you keep avoiding the big tax hit when the second spouse dies. My mother passed away and had not that much more than that $241,000, she had $275,000 in her RRSP transferred from my father years back and she had to pay upon death $145,000. You never want to mention this. Also, with big RRSP balances, one spouse has say $300,000, the other spouse has $200,000, when one spouse passes away, now that one spouse has $500,000 which affects everything from OAS clawbacks to higher income taxes each year to like I said a real big or bigger tax hit upon death of the final spouse.

If someone gets maximum a 25% to 28% tax rate back as a refund from their RRSP deductions, this is not always a big enough tax benefit to have an RRSP. I think a non-registered account gives flexibility in not having to rely on big RRSP withdrawals in retirement or big RRIF withdrawals in retirement. If you need $30,000 for a car and you have $30,000 in a non-registered account, it is there $30,000 taken out of your account but if you need $30,000 for a car but you need to take it out of your RRSP, you will need $50,000 so taxes hit you hard and you have much less RRSP now. It just seems to me you have no backing in actual numbers, figures and are just talking as if it is always best to have an RRSP. It is not always the case.

———-

I’d say look into it a bit more and run scenarios, Linda. In nearly every case, RRSPs are beneficial. Consideration for timing and amounts of withdrawals is important.

Regarding taxation: yes, of course RRSPs are taxed and of course deferred taxation is applied on a rolled-over RRSP. The rules are fairly clear about this.

#27 Shawn Allen on 10.16.21 at 1:04 pm

#8 mark on 10.16.21 at 10:55 am

I guess warren buffet is just special?

**********************************
Yes, of course, Warren Buffett is indeed incredibly special. He is one of the greatest investors and business managers of all time. Also an incredibly intelligent thinker about all things economic. An incredibly strong writer as well.

A very virtuous person.

What is your point?, obviously as a special person he is by definition rare. Almost no one can match his investment record. We are talking what the 0.0001% or something like that.

#28 Sail Away on 10.16.21 at 1:15 pm

As a junior engineer, the weekly group lotto was a big thing. I never played, under the assumption that if they won a big amount, a lot of folks would quit or lose motivation and I’d benefit by moving way up the ladder.

The office politics, jockeying for position and power plays were something I always greatly enjoyed. Now I’m Pres. Still don’t play the lottery.

#29 Dino on 10.16.21 at 1:29 pm

Canadians have a real estate disease due in part because the Bank of Canada has a low interest rate disease keeping it low for longer with no real regard to inflation, cost of living and debt, savings impacts on Canadians. It is so rigged until they want to pull the plug.

#30 The joy of steerage on 10.16.21 at 1:31 pm

Isn’t Tesla amazing… no need to be awake to drive…. likely SA’s better half… WFH might be advised in this case….

https://twitter.com/GlobalBC/status/1449208476329287682

#31 Dennis on 10.16.21 at 1:36 pm

I know a guy who plays $100 a week in lottery, proline, betting etc. If he just invested that in a TFSA for 35 years and earned 5% a year, he would have $470,000 tax free. Well most people between gambling, smoking and other bad habits, they would have over a $1 million in their TFSA.

#32 TurnerNation on 10.16.21 at 2:00 pm

Weekend checkup. Life, and death in Kanada – is very bizarre.

Basically you must put up with your leaders systematically destroying the country, every few year.
– T1’s NEP (before my time) to O&G
– Fed’s killed Least Coast Fisheries.
– BC logging, AB O&G (Again) will be next – under the guise of ‘climate’. (T2)
– The current War on Small Business/reset (T2)

What a patchwork fifedom of private and public oligopolies. QC has it’s own civil law system (they will not be kneeling before the Queen I bet). BC has government car insurance. Native owned mini-states within the country.

Severe delusions are required. EvRyoNe WaNts to LiVe here!! No they don’t. Come here for government handouts basically, no serious business owner would come. The elites will hang in the warmer climes.
Health care rationing is a Way of Life. That’s right.
Plunk down you AMEX Black card and you get… End of the line Comrade. Right behind the babushkas there for a monthly bunion check-up.
Keep telling yourself “BuT At LeAsT We ArE Not CoUnTrY XYZ!! Ooohh I hear it’s bad there”

—–
Death in Kanada. Also bizareness. Your death will make the newspaper insofar as it will be used toward a global political goal. (That is furtherance of the global New System, or “Climate goals” or whatever.)
Let me demonstrate.
– A CV death. FRONT PAGE news. Need I say more.
– Overdose death. 2nd Page News. Will be used to place more ‘safe injection’ junkie havens into your neighbourhood.
– All other deaths. Back of the bus. Buried in the Obits somewhere.
– Climate Deaths? Ok I made that up or did I…

#33 westcdn on 10.16.21 at 2:00 pm

Luck or skill. I try to make both work for me but I make mistakes. I have learned not to double down. I do not make prices, I live for your entertainment.

I am not wealthy and have been suffering a though time since June with my investments – I have hope in me. People seem to show up to strengthen my spine. God and I have a relationship, don’t piss me off and I wont you.

Nothing hurts me as my trust more than betrayed. I have met accomplish liars who fool me. Once, I can take it but then you have lost if you don’t learn.

I am sitting on my hands with investments. It hurts me but it gives me time to evaluate. Hey, I am all for free advice and criticism, how else would I learn besides being crushed by lousy decisions?

As long I get more things right than wrong, I will survive. Rich seems to escape me – I think it is because I won’t step on people’s head willing. Me and big government are going to have an issue.

#34 mike from mtl on 10.16.21 at 2:02 pm

Year to day, in US$, Jan 4 to Oct 15.

VOO:
339.03 > 409.93 +3.904div = 19.54%

QQQ:
309.31 > 368.94 +1.206div = 19.67%

ARKK:
124.69 < 115.80 +0.0div = -7.12%

***yes I am aware ARK had a spectacular '20 but that was a fluke and all likely not to be repeated.

#35 Think About It on 10.16.21 at 2:06 pm

Sail Away, as governments keep increasing income tax rates both provincially and Federally, Liberals most, NDP as well, McGuinty, Wynne, Trudeau, Morneau, Freeland, we are in the 52% to 56% income tax rates.

If you have an RRSP worth $150,000 or most and youw ant to pass it down to your family that is not your spouse, it is possible in coming years you will see as high as 60% tax rates for large RRSPs, anything after $150,000. If you invest your RRSP prudently making 6% to 7% a year and you are maxing it out, you will likely lose $300,000 or more on a $550,000 RRSP balance. This is not be ignored because as governments get more hungry for tax money, they will be increasing RRSP tax rates and other tax rates, even $100,000 or $150,000 RRSP is more and more a target of much higher taxes and becomes a tax trap.

#36 Shawn Allen on 10.16.21 at 2:09 pm

Take Canada Pension Early or late?

I’ve just ran some numbers on this…

If you think you are going to die much before age 80, and have no surviving spouse that would get it then you should probably take it at age 60.

Note that a surviving spouse who already has a fairly high level of CPP will not get much from a deceased spouse’s CPP. But of the surviving spouse has no CPP of his or her own then the deceased’s CPP will continue adn that could be a big deal in some cases.

If you desperately need the money before age 65 you don’t have much choice but to take it at age 60.

If you think you will live past age 80 but are in a position to take it and not spend it but use it for incremental investing above and beyond what you would other wise invest and if you can achieve a real return of 4% or more after inflation and fees and any taxes then you should probably take it at age 60.

If you think you will live past 80 and or have a spouse with no or low CPP that will live past 80 you should probably delay CPP until the old standard age of 65 or possibly even longer all depending on your circumstances.

Personally, I think it is a bit of a tough decision. 60, 65 or 70. I always figured just take the old standard of 65. For me, indications are I will live longer than average based on my health, lifestyle and family history.

I’m 61 and don’t need the money now. If I take it now, my suspicion is I will spend it rather than invest. I already have sufficient investments.

As a life-long investor, the notion of waiting and getting more later feels consistent with how investing works.

If I should die young and leave CPP money on the table, well that’s how the whole pension system is designed. The money from those who die young goes to pay for pensions of those who die older than average.

to each his own, but I would say the math and life circumstances matter a lot. Circumstances include employment, spouse, health, financial situation and tax brackets. The notion that EVERYONE should grab CPP 5 years early despite a 36% haircut does not make sense to me. But of course these people collect five years longer.

On the other hand waiting until age 70 is not for me. But it could make sense for someone who expects to live long and who does not need the money now (say working ’til 70) and really needs to build up as much of a pension as possible for a time when they will not work and especially if they have a non-working spouse who can collect that as a survivor.

What is the age expectancy of last death for an average couple at age 70? And what if the spouse is five years younger? How many years could the couple expect to collect? All the math and facts matter even though the ages of death are only a guess.

So many words, wasted. Take the money. Enjoy life in health. All else is human arrogance. – Garth

#37 R on 10.16.21 at 2:21 pm

#30 The joy of steerage:
Sleeping in a Tesla is against Tesla’s agreements while you are beta testing their Full Self Driving. There is currently a lot of systematic unjustied negative main stream media press againt Tesla. The reasons include Tesla does not pay for advertising because they can sell everything they make,so main stream media portray Tesla negatively against OEMs that need to pay billions in advertising. Other reasons include, Tesla does not support the UAW or the dealership model of distribution. Tesla is a threat to the Oil & Gas industry as well as established power utilities .Full discloser, I own Tesla stock and long calls. I truely cannot think of a safer investment, everything else, to me, is a crap shoot. The next 5 years will be very interesting, because by 2025/6, everything will be obvious. Think of Kodac in year 2000.

#38 Anne in NV on 10.16.21 at 2:21 pm

“waterboarded on the West Coast.”
I’ve never heard THAT expression, but WOW! That is so true here yesterday and today!

#39 Ponzius Pilatus on 10.16.21 at 2:27 pm

#24 crowdedelevatorfartz on 10.16.21 at 12:23 pm
@#110 faron

“You woke up on the wrong side of the atmospheric river this morning. Sheesh.”

+++

Actually I enjoy the rain.
Going for a bicycle ride later.
———-
Yeah, you’re lucky that Vancouver is such a bicycle friendly city.
We’re becoming the Amsterdam of North Vancouver.
As for the rain:
Very little  stops me from taking my daily 10k steps walk.
Dress up like the Fishman, and you’re good to go.
So refreshing.
The only time I didn’t go for my walk was when we had the “heat dome” a few days in the summer. Sweating like a mule.
Friking 40 degrees.
Mexico?
Give me the rains in Vancouver, any day.

#40 TurnerNation on 10.16.21 at 2:38 pm

— Life in Kanada…I wasn’t kidding. Wake me at 90% taxation. But our world class health care system guys!!

https://www.vancouverisawesome.com/amp/local-news/reciprocity-new-program-will-help-bc-residents-decolonize-our-backyards-4515855
“Specifically, it’s a way for people living on the historical lands of B.C.’s First Nations to financially recognize that fact. Reid calls it a way to decolonize our collective backyard without waiting for government action.

The mechanics of it are fairly simple. Reciprocity will run different trust funds based on different regions; right now they’re focusing on launching the South Island Reciprocity Trust with a Lower Mainland Reciprocity Trust also in the works (which would include Metro Vancouver).
People will voluntarily choose to pay into the trusts as something akin to rent.


— Blockchain. It was invented for us. ID. Every country is on board. A staged rollout, not to alarm us.

.Costa Rica businesses, activities will require Covid-19 vaccine (ticotimes.net)

.Finland approves Covid pass (yle.fi)

—–

— Supply Chain. Would be a reeel shame if the railways struck eh Comrade?

“(Rebel News) “A group of workers for Canadian National Railway have retained legal representation and issued a cease and desist letter to the company over its vaccine mandate.
On September 8, CN announced the company’s vaccine requirements which will apply to all 25,000 employees and new hires in Canada and its wholly-owned subsidiaries. The policy will extend beyond direct employees to CN’s contractors, consultants, agents and suppliers and anyone who accesses CN’s Canadian properties.”

—-
—–
— Electric cars are key in the global nanny state.
Real simple. The New System is control over our Breeding, Feeding and Travel/Movement.

.UK Proposes Law To Switch Off EV Home Chargers During Peak Hours
Going into effect next year, a new law aims to protect the grid from excessive strain; it won’t apply to public chargers, though.
https://insideevs.com/news/537120/ev-chargers-switched-off-uk/amp/

#41 Ponzius Pilatus on 10.16.21 at 2:43 pm

#25
David Mckay, chief executive of Royal Bank of Canada, thinks we’re on the verge of an epic shopping spree.
——————–
sure
It’s gonna be a great Black Friday with lots of empty shelves due to supply chain problems.
And Christmas will be bleak.
Well, at least no plastic crap from China, that end up broken in the closset after Boxing Day.
The spoiled brats will have to do with some Apples and Oranges and a set of Monopoly under the tree.
But, They will grow up healthy and rich, just like Uncle Warren.

#42 Sail Away on 10.16.21 at 2:44 pm

#30 The joy of steerage on 10.16.21 at 1:31 pm

Isn’t Tesla amazing… no need to be awake to drive…. likely SA’s better half… WFH might be advised in this case….

https://twitter.com/GlobalBC/status/1449208476329287682

———

It’s magical. And an incredible investment.

#43 Flop... on 10.16.21 at 3:07 pm

Pretty fitting that Toronto is number, that’s what number popped into my head when I visited.

Drop it like it’s hot…

M47BC

——————————

“Hong Kong, New York City, and Paris? They have nothing on Canada’s biggest real estate bubbles. UBS released its annual Global Real Estate Bubble Index today. Two Canadian cities managed to rank near the top of the charts — Toronto and Vancouver. Toronto home prices now rank as the second biggest bubble in the world. As for Vancouver, it was a few spots lower, beating notorious markets like San Francisco and Singapore.

Toronto Real Estate Is Now The 2nd Biggest Bubble In The World
Toronto real estate is now the second biggest bubble in the world, moving up a spot from last year. While it’s not the top spot it held in 2017, it has a much higher bubble risk score. Pretty impressive for a city that didn’t even rank in the 2016 index. That’s how fast prices have grown.

UBS said Toronto real home prices doubled over the past ten years, in part to population growth. In 2018, they observed a housing correction that was restoring some fundamentals. It carried through to 2019, but came to an abrupt stop by year-end. At that point, falling mortgage rates reignited high home price growth. It was helped by the Bank of Canada’s mortgage liquidity injections. Since the pandemic hit, this trend has accelerated even faster.”

#44 Shawn Allen on 10.16.21 at 3:08 pm

Arrogance?

So many words, wasted. Take the money. Enjoy life in health. All else is human arrogance. – Garth

**************************
Now there is something Garth and I both have and I don’t think either would deny it: Arrogance. But really I think Garth has the edge there and rightly so. He is far more accomplished than I am.

The statement stands. Only an arrogant guy would think it was about him. – Garth

#45 Jeff on 10.16.21 at 3:10 pm

How ironic for this revelation to come from a portfolio manager.

#46 Nonplused on 10.16.21 at 3:19 pm

Studying human psychology is fun, especially that of psychologists.

What’s clear from the lottery example is that, among other things, people clearly aren’t very good and math, and especially statistics.

I wonder how that came to be? It must be the case that math wasn’t particularly necessary for our ancestors. “One”, “more than one”, “a lot” and “a crap load” were probably the only numbers they needed.

Or maybe it has something to do with the fact that long term reproductive success is so statistically unlikely that creatures, including humans, evolved to shoot for the moon. Genghis Khan for example, still has many descendants walking the earth due to the large number of women he, er, conquered? 100 years from now I will likely have none. I don’t have thousands of conquered concubines. So maybe the propensity to take seemingly irrational risks is built in, because those are the only people that make it in the long run (even though most of them die trying and get a Darwin award).

Hockey is my favorite example because it is such a Canadian thing. For example, there are approximately 624,148 youth registered for hockey in Canada. Of the new kids that sign up every year, only 1 in 10,000 will ever play a single game in the NHL, and that mostly from the bench. Yet parents spend hundreds of thousands of dollars on their kids if they show any potential. Most of that money is truly and utterly wasted. Yet this is what we do, just in case we have the next Sidney Crosby on our hands. The amount of money parents spend on their “future stars” every year far exceeds that of the entire NHL payroll.

So ya I wouldn’t expect people to approach investing any differently.

#47 Bezengy on 10.16.21 at 3:21 pm

#26 Sail Away on 10.16.21 at 12:37 pm
#184 Linda on 10.15.21 at 9:42 pm
#35 Think About It on 10.16.21 at 2:06 pm

RSP TRAP?, (as some would call it)

Is there a rule of thumb for what percentage of your investments should be in registered or non registered (and TFSA because withdrawals are non taxable) accounts depending on your current age? Seems to me avoiding withdraws from your registered accounts until the age of 71 could be a big mistake. Probably very common with anyone who has a DB pension.

#48 Sail Away on 10.16.21 at 3:21 pm

#35 Think About It on 10.16.21 at 2:06 pm

Sail Away, as governments keep increasing income tax rates both provincially and Federally, Liberals most, NDP as well, McGuinty, Wynne, Trudeau, Morneau, Freeland, we are in the 52% to 56% income tax rates.

If you have an RRSP worth $150,000 or most and youw ant to pass it down to your family that is not your spouse, it is possible in coming years you will see as high as 60% tax rates for large RRSPs, anything after $150,000. If you invest your RRSP prudently making 6% to 7% a year and you are maxing it out, you will likely lose $300,000 or more on a $550,000 RRSP balance. This is not be ignored because as governments get more hungry for tax money, they will be increasing RRSP tax rates and other tax rates, even $100,000 or $150,000 RRSP is more and more a target of much higher taxes and becomes a tax trap.

———

Speculate not, amigo

#49 Nonplused on 10.16.21 at 3:24 pm

#9 Cowtown Cowboy on 10.16.21 at 11:12 am

“Now for a final rip down to my favorite jerkey store, nothing but Premium in the Harley”

Why would you put premium in a Harley?

#50 Nonplused on 10.16.21 at 3:29 pm

#17 Damifino on 10.16.21 at 11:55 am
I once had a co-worker who didn’t want to join the office 6/49 lottery pool, siting most of the points presented in today’s post.

After much goading, he agreed to join but he insisted on picking his own set of numbers. He chose 1,2,3,4,5,6.

That angered a lot of folks who though he was being a poor sport by picking numbers “with obviously no chance of winning”. He argued that his numbers had precisely the same chance as any other random sequence. That fell upon deaf ears.

Yes, I suppose he was being a bit of smart-ass, but he certainly was correct. People generally detest that attitude when it flies in the face of their superstitious numeric beliefs.

—————————————

Interestingly, the cow-orkers were kind of right. 1,2,3,4,5,6 is the most commonly played number set (because there are a lot of smart-asses that don’t realize there are other smart-asses) so if it ever comes up it will be the most split pot ever, by a long ways.

#51 tbone on 10.16.21 at 3:36 pm

Lotteries are a voluntary tax for idiots .
I buy a 649 ticket once or twice a week .
You cant win if you dont play .

What scares me though are the people in line with me .
It looks like cant afford groceries and they spend like drunken sailors on these tickets . No wonder they are poor.

#52 Flop... on 10.16.21 at 3:36 pm

Man, I don’t know.

I still feel better paying $75 each time I fill up at the gas pump, with 70 bucks for gas and $5 for a lottery quick-pick, instead of stewing on getting ripped off at the pump alone, I at least have a very, very small chance of brighter days.

Paying 30 something cents a litre in taxes for it to get hosed on some carbon scam annoys me.

That, and the ghost of Whitney Houston riding in the back seat belting out “I Believe The Children Are Our Future”…

M47BC

#53 Nonplused on 10.16.21 at 3:45 pm

#102 crowdedelevatorfartz on 10.16.21 at 9:17 am
@#95 Nonplused

The US Port Authority’s just need to hire unionized, communist Chinese truckers to clear up the backlog of shipping containers…..problem solved.

——————————————

Funny you should say that. Apparently the “anti-gig” legislation is part of the problem. Originally it was thought to apply only to freelance writers because they write for a living and so they wrote about what it would do to them. But shortly thereafter Uber and Lyft starting publicly complaining. Nobody really thought to think that owner/operators use a similar model to Uber and always have. Oops.

It appears that the supply chain problems are “Made in California” and not China. Oh well at least they can still build something. It makes sense though, because if you look around the world for where all the cargo ships are anchored off shore waiting to be unloaded, it’s California not Germany. Not even New York. Makes sense to start our investigation in California since that’s where all the boats are piled up.

#54 Philco on 10.16.21 at 3:46 pm

#39 Ponzius Pilatus on 10.16.21 at 2:27 pm
#24 crowdedelevatorfartz on 10.16.21 at 12:23 pm
@#110 faron

“You woke up on the wrong side of the atmospheric river this morning. Sheesh.”
+++
Actually I enjoy the rain.
Going for a bicycle ride later.
———-
Yeah, you’re lucky that Vancouver is such a bicycle friendly city.
We’re becoming the Amsterdam of North Vancouver.
As for the rain:
Very little stops me from taking my daily 10k steps walk.
Dress up like the Fishman, and you’re good to go.
So refreshing.
The only time I didn’t go for my walk was when we had the “heat dome” a few days in the summer. Sweating like a mule.
Friking 40 degrees.
Mexico?
Give me the rains in Vancouver, any day.
—————————-
I can’t find reason 1 to live in Van rain or shine. I left 20 years ago.
Got a big property lotsa 100ft+ trees nice when its hot as hell out. 3 minute anywhere in town. 30 beaches in 15min no peeps no parking issues.

#55 Dr V on 10.16.21 at 3:53 pm

15 IHCTD9

I will capitalize for emphasis (I’M NOT YELLING)

In the original example, the renter’s investment was
LIMITED to the difference with ownership costs, plus his original savings of $100k. This resulted in NW $247k or thereabouts.

In order for the owner to “spend” the $728k, he had to
BORROW a portion of it. For the renter to “spend” the same amount, you have to effectively loan money to him
to invest. Your NW for the renter of $993k jumped out at me because it was so much more than Daniel’s.

Under this condition, with RE outperforming B & D by a very small amount, but the renter having lower costs, I
would expect our two persons to have similar results. I never ran the numbers myself.

In Daniels example, leverage was NOT available to the renter as is the usual REAL WORLD condition. He’d be lucky to get a $20k LOC.

The purpose of Daniel’s post was to show how leverage, so available to HOMEOWNERS, increased his net worth drastically compared to the renter over the last 10 years under the given market conditions.

Myself, Penny and KLNR understood this.

You CHANGED the assumptions clearly stated by Daniel

It was not a pump on RE or a slag on renting/investing.

If two renters had been compared, but one could use
leverage, you would have a similar result under those market conditions

And that’s about all I can say.

Thanks. Have a good weekend.

#56 Nonplused on 10.16.21 at 3:53 pm

Meanwhile also in California:

https://mishtalk.com/economics/california-bans-gas-powered-lawn-mowers-why-not-ban-grass-instead

Be sure to check out the $32,500 lawnmower advertisement linked at the end.

My father’s generation used to have a saying that one day God picked up the continent by the east coast and all the loose nuts rolled west. Looks like they’ve been inbreeding since then.

#57 Don Guillermo on 10.16.21 at 4:02 pm

#39 Ponzius Pilatus on 10.16.21 at 2:27 pm

Yeah, you’re lucky that Vancouver is such a bicycle friendly city.
We’re becoming the Amsterdam of North Vancouver.
As for the rain:
Very little stops me from taking my daily 10k steps walk.
Dress up like the Fishman, and you’re good to go.
So refreshing.
The only time I didn’t go for my walk was when we had the “heat dome” a few days in the summer. Sweating like a mule.
Friking 40 degrees.
Mexico?
Give me the rains in Vancouver, any day
*****************************************

Winter in Maz Mexico:
-highs mid to hi 20’s; lows mid to high teens.
Mazatlan has updated and improved its amazing Malecon. The Malecon runs right along the beach and is beautifully paved with a bike lane and nice palm trees and flower beds. You can go as far or as short as you want and there’s always a breeze blowing in off the ocean to keep you cool.

https://noroeste.com.mx/files/Publicacion/1130666/Foto/note_picture/MALECON_MAZATLAN1-221327.jpg

Summers in Calgary:
-YYC has the most extensive urban pathway and bikeway network in North America. The City maintains approximately 1000 km of regional pathways

https://www.calgary.ca/csps/parks/pathways/pathways-in-calgary.html

Great weather in both worlds and you don’t have to pretend to like the rain. Bonus points – lots of extra cash in your jeans.

Fun Fact – 1000’s of LM and VI folks spend winters here and love it. Most VI folks fly thru YYC as connections are better than YVR.

#58 Stuart on 10.16.21 at 4:12 pm

Wrong Question…
the objective is not to beat the index each year. Bill Miller did it for 15 years and the next year he did not but still his average was very good. We can all do the same and pick winners and reduce risk when buying stock which was too expensive long time ago. There even is an index fund called dogs of the DOW which beats the index most years.
Just beat the balanced index funds which should not be that hard and get a reasonably higher return without taking too much risk. Individual investors have been doing this longer than I have as I have been doing it from my twenties and I’m 74 now and better off.
Our average return since the TFSA inception is close to 20%. A bit lower on the other accounts.
On lotteries just buy a ticket a week like one Max and one mini-lotto as entertainment which cost $5.5.

#59 Sail Away on 10.16.21 at 4:29 pm

Hey, has anyone analyzed the economics of renting and investing vs buying a house over a 10-year timeframe assuming a starting point of, say, $100k savings?

#60 slick on 10.16.21 at 4:38 pm

I only buy 1 ticket per draw.
My chances of winning are only slightly better than no ticket.
The money comes out of the entertainment portion of the budget.
I don’t buy a ticket to win, I buy it to dream about winning.

#61 Russ on 10.16.21 at 4:40 pm

Don Guillermo on 10.16.21 at 4:02 pm

#39 Ponzius Pilatus on 10.16.21 at 2:27 pm

Winter in Maz Mexico:
-highs mid to hi 20’s; lows mid to high teens.
Mazatlan has updated and improved its amazing Malecon. The Malecon runs right along the beach and is beautifully paved with a bike lane and nice palm trees and flower beds. You can go as far or as short as you want and there’s always a breeze blowing in off the ocean to keep you cool.

https://noroeste.com.mx/files/Publicacion/1130666/Foto/note_picture/MALECON_MAZATLAN1-221327.jpg

Fun Fact – 1000’s of LM and VI folks spend winters here and love it. Most VI folks fly thru YYC as connections are better than YVR.

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

I was musing this morning that Ponz & Faron might want to send this Edward Bear tune along to you.

“… still going nowhere.”

Cheers, R

#62 Russ on 10.16.21 at 4:42 pm

In case people don’t know or remember the tune:

You, me & Mexico

https://www.youtube.com/watch?v=xoTZfAt7afA

#63 crowdedelevatorfartz on 10.16.21 at 4:53 pm

@#43 Floppie
“Global Real Estate Bubble Index today. Two Canadian cities managed to rank near the top of the charts — Toronto and Vancouver. Toronto home prices now rank as the second biggest bubble in the world. As for Vancouver, it was a few spots lower,”

++++

Hopefully Trudeau and the Liberals get to wear this stink like 2 week old rotten fish in a pair of men’s designer shoes.

#64 Habitt on 10.16.21 at 4:53 pm

Merci encore Mr Doug

#65 Doug Rowat on 10.16.21 at 4:55 pm

#45 Jeff on 10.16.21 at 3:10 pm
How ironic for this revelation to come from a portfolio manager.

—-

It’s like a black fly in your Chardonnay.

We can constantly manage risk and volatility, we can target a reasonable 6-7% rate of return over a full market cycle and very likely achieve it, and we can counsel our clients against making perilous emotion-based investing errors (going to cash at the first sign of market trouble, for example), but I would never promise a client that we’ll smoke the S&P 500 on a routine basis.

There’s one commonality with all our clients: they don’t like being lied to.

—Doug

#66 Ponzius Pilatus on 10.16.21 at 5:25 pm

#42 Sail Away on 10.16.21 at 2:44 pm
#30 The joy of steerage on 10.16.21 at 1:31 pm

Isn’t Tesla amazing… no need to be awake to drive…. likely SA’s better half… WFH might be advised in this case….

https://twitter.com/GlobalBC/status/1449208476329287682

———

It’s magical. And an incredible investment.
————-
Sure magical.
What a good investment.
He got fined around 800 buckeroos.

#67 Sail Away on 10.16.21 at 5:29 pm

#47 Bezengy on 10.16.21 at 3:21 pm

Is there a rule of thumb for what percentage of your investments should be in registered or non registered (and TFSA because withdrawals are non taxable) accounts depending on your current age? Seems to me avoiding withdraws from your registered accounts until the age of 71 could be a big mistake. Probably very common with anyone who has a DB pension.

——–

Ah, this I enjoy! All scenarios vary.

Let’s plug this simple scenario into the spreadsheet:

Situation: Single person, age 55, paid off home, no pension, with the following assets all B&D earning 7%:

$500k RRSP
$100k TFSA
$500k Nonreg investing
Pre-tax income needed: $60k

Between 55-60, withdraw $60k from RRSP annually

Assets at 60:
$300k RRSP
$175 TFSA
$700k Nonreg investing

Between 60-65, withdraw $40k from RRSP annually, $20k from CPP

Assets at 65:
$150k RRSP
$300 TFSA
$1M Nonreg investing

Between 65-70, withdraw $35k from RRSP annually, $20k from CPP, $5k from OAS

Assets at 70:
$0 RRSP
$450 TFSA
$1.4M Nonreg investing

…and so on

#68 the jaguar on 10.16.21 at 5:29 pm

@63 Doug Rowat.

Oh yes. This is the Doug R I love. He’s not going to be dragged under the bus. He’s got truth, reputation, smarts, and isn’t remotely interested in backing down from the bullies to ‘make nice’.
Sock it to’ em, Doug. These ‘Brutes’ are Bush League material.

#69 Ponzius Pilatus on 10.16.21 at 5:33 pm

So many words, wasted. Take the money. Enjoy life in health. All else is human arrogance. – Garth
————–
The Bearded One has spoken.
Listen up, Grasshoppers.

#70 Mig Thaw on 10.16.21 at 5:37 pm

Marriage is a gamble. Lots of homeless men proves it.

#71 Damifino on 10.16.21 at 5:54 pm

#50 Nonplused

Interestingly, the cow-orkers were kind of right. 1,2,3,4,5,6 is the most commonly played number set (because there are a lot of smart-asses that don’t realize there are other smart-asses) so if it ever comes up it will be the most split pot ever, by a long ways.
——————————-

Well… it seems you are absolutely correct! According to the OLG 1,2,3,4,5,6 is the most commonly played number set.

https://about.olg.ca/players/popular-number-combinations/

If his co-workers had known that (which I doubt) they might have succeeded in convincing him to change his picks based solely on the likelihood of a very diminished jackpot.

I imagine the most common 4-digit pin number is 1,2,3,4 and the most common password is “password”.

People are seriously lazy.

#72 Flop… on 10.16.21 at 6:13 pm

Being a Blue Collar Bum, the only remote job I’ll ever have is picking up the remote to turn the t.v on after busting my hump on site each day…

M47BC

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

“Charting the Continued Rise of Remote Jobs.

When the pandemic first took hold in 2020, and many workplaces around the world closed their doors, a grand experiment in work-from-home began.

Today, well over a year after the first lockdown measures were put in place, there are still lingering questions about whether remote work would now become a commonplace option, or whether things would generally return to the status quo in offices around the world.

New data from LinkedIn’s Workforce Report shows that remote work may be here to stay, and could even become the norm in a few key industries.

Broadly speaking, 12% of all Canadian paid job postings on LinkedIn offered remote work in September 2021. Prior to the pandemic, that number sat at just 1.3%.

While this data was specific to Canada, the country’s similarity to the U.S. means that these trends are likely being seen across the border as well.”

#73 Wrk.dover on 10.16.21 at 6:47 pm

#46 Nonplused on 10.16.21 at 3:19 pm
Hockey is my favorite example because it is such a Canadian thing. For example, there are approximately 624,148 youth registered for hockey in Canada. Of the new kids that sign up every year, only 1 in 10,000 will ever play a single game in the NHL, and that mostly from the bench. Yet parents spend hundreds of thousands of dollars on their kids if they show any potential. Most of that money is truly and utterly wasted.
______________________________________

I know a dad that didn’t want in on that hassle, offered the kid the equipment in money instead. A small used go-cart appeared which got flipped for a dirt bike, a bigger one and so on, while the dad bought the kid some tools not the Dads thing…but gas money saved…

Now the grade 12 educated 40 year old kid is employed as a small private fleet mechanic with full benefits, has a paid for custom house, with a full service garage hoist etc of his own and flips cars regularly.

Turns out the kid is a business genius, not a jock.

And the dad gets his car fixed for free.

#74 SoggyShorts on 10.16.21 at 6:53 pm

My last lotto play was close to 20 years ago:
West Edmonton mall I bought 5 blackjack scratch n’ wins.
I handed the teller $5 and he let me pick 5 of the 7 available. 20 minutes later they announced over the PA system that some lady had won $21,000 on one of the remaining 2 tickets.

#75 Dr V on 10.16.21 at 6:58 pm

67 Sailo

How does a 60 yo single person draw $20k per year from CPP?

Something similar was my plan as well, but actually front-loading the tax by RRSP withdrawals may not result in the lowest tax overall. My advisor ran it for me, and even she was a bit surprised . I will revisit this with her soon.

#76 crowdedelevatorfartz on 10.16.21 at 7:06 pm

@#67 Sail Away
“Ah, this I enjoy! All scenarios vary.
Let’s plug this simple scenario into the spreadsheet:
Situation: Single person, age 55, paid off home, no pension, with the following assets all B&D earning 7%:”

+++

Interesting scenarios …. but.
If you are still working and you need the tax deferral that investing in an RRSP brings….cashing out RRSP’s before 65 ….is not an option.

7% per annum?
While achievable some years….To expect that all the time?
I plan for (estimate) 3-5% on average. Anything above that is gravy.

#77 I still don't get it on 10.16.21 at 7:16 pm

US college football

Kentucky vs Georgia. 93000 fans.

No masks

#78 crowdedelevatorfartz on 10.16.21 at 7:28 pm

This CBC Marketplace story about Real Estate agents should surprise no one.

https://www.cbc.ca/news/canada/marketplace-real-estate-agents-1.6209706

#79 mark on 10.16.21 at 7:33 pm

The worst thing is every year a bunch of clowns say the same thing “this year you’ve gotta be selective, you’ll need to get active” And the media prints it without a question despite the fact even on an annual basis it’s a coin toss for active managers.

#80 Haas Say Yhoo on 10.16.21 at 7:41 pm

#6 I have to ask, “what pandemic savings”? Many retired people in this very lovely country of ours, was left out of any action for that to happen. Two $500.00 dollars twice given out for which income taxes apply, did not even pay for one visit to the dentist. I may add, many retired people in the amount of 3 million mostly women, were not considered worthy of receiving help. Some retirees in this country make as little as $1,930.00 dollars a month including OAS and CCP and through no fault of their own. Check it out and see what you may discover.

#81 Sydneysider on 10.16.21 at 8:05 pm

Options provide an opportunity to win big on a low stake in much the same manner as a lottery. They have attracted massive interest from retail investors/gamblers this year.

#82 Sail Away on 10.16.21 at 8:30 pm

#75 Dr V on 10.16.21 at 6:58 pm
#76 crowdedelevatorfartz on 10.16.21 at 7:06 pm

Re: forecasting

——

Hey, that’s just one very simplistic imaginary scenario with all criteria as stated. It may bear some resemblance to reality but should not be conflated with actual reality. Your imaginary scenario may differ. Spreadsheets are easy to build and modify.

#83 Cowtown Cowboy on 10.16.21 at 8:44 pm

49 Nonplused on 10.16.21 at 3:24 pm
#9 Cowtown Cowboy on 10.16.21 at 11:12 am

“Now for a final rip down to my favorite jerkey store, nothing but Premium in the Harley”

Why would you put premium in a Harley?

———————————————————————————-

Harley-Davidson advises owners to use only premium fuel for their motorcycles. Like the Big Twins used in Harleys, large V-Twin engines have higher compression ratios than other engines do. Excessive compression in the engine will cause fuel to ignite prematurely. When this happens, the engine will run rough and may suffer extensive damage.

With its high octane content, premium gasoline is more resistant to compression-induced ignition and is better for Harleys

#84 Philco on 10.16.21 at 8:49 pm

#63 crowdedelevatorfartz on 10.16.21 at 4:53 pm
@#43 Floppie
“Global Real Estate Bubble Index today. Two Canadian cities managed to rank near the top of the charts — Toronto and Vancouver. Toronto home prices now rank as the second biggest bubble in the world. As for Vancouver, it was a few spots lower,”
++++
Hopefully Trudeau and the Liberals get to wear this stink like 2 week old rotten fish in a pair of men’s designer shoes.
—————————-
Didn’t ya hear? He’s going to fix it.
I guess his voters didn’t realize he couldn’t fix a sandwich.

Hi Doug Rowat:
So how does one keep up, when in my life, the reported inflation seem low. Steak and gutters are up 15-20%. Hell fir fire wood was $200 a cord now $300 I hear. You know, having your stash keep up with real inflation plus live off it?
That’s why I’m a big RE guy.
Cheers

#85 Habitt on 10.16.21 at 9:13 pm

70 Mig Thaw. Gamble it is. It’s the feminization of society. Lay down and take it like a good mommas boy. Ya gotta wonder where Trump came from. Lol

#86 Cowtown Cowboy on 10.16.21 at 9:26 pm

#20 Ponzius Pilatus on 10.16.21 at 12:07 pm

I managed the office 6/49 Lotto Pool for 6 years for about 50 people.
Five buck each week. 250 each week. 13,500 per year.
81,000 over 6 years.
I think we totalled about 1k in winnings.
Too bad for me because I planned on absconding with any winning over 500 k and join my friend Jonny G. In Mexico.
And by the way, a women in BC had a meteor piece coming thru here roof and hit her bed.
She won the lottery by not being in her bed.

————————————————
Hmm, I too know a friend who goes by the moniker Johnny G…perhaps the same person??

#87 Philco on 10.16.21 at 9:26 pm

#77 I still don’t get it on 10.16.21 at 7:16 pm
US college football
Kentucky vs Georgia. 93000 fans.
No masks
———–
The news exageates? EVERYTHING. Fear sells the best I do know that.

#88 Habitt on 10.16.21 at 9:30 pm

80 Hass Say Yhoo. Most here don’t want discovery. It’s gotta be their fault to be poor. Home ownership or a roof over your head is not a right but accumulating obscene amounts of wealth is. It’s always better to have people eating cake. We collectively have lost our greedy way.

#89 Doug t on 10.16.21 at 9:36 pm

“Lucky” is questionable – that kind of winning usually destroys people

#90 just say no on 10.16.21 at 9:36 pm

I guess that answers that, I was hoping to see many bragging how rich they got on the lotto. They may have gone to another blog after winning? Slow and steady wins the race with my conservative portfolio. I may buy a 2 dollar lotto tickets a few times a year…. for the dream.

#91 Doug t on 10.16.21 at 9:44 pm

#36 yawn Allen

Blah blah blah blah blah blah…..zzzzzzzzzzzz

#92 Sail Away on 10.16.21 at 9:51 pm

#75 Dr V on 10.16.21 at 6:58 pm
67 Sailo

Something similar was my plan as well, but actually front-loading the tax by RRSP withdrawals may not result in the lowest tax overall. My advisor ran it for me, and even she was a bit surprised . I will revisit this with her soon.

——–

In reality, of course, a combination of tax-advantaged nonreg, TFSA and RRSP, based on total $ needed, will always yield a more efficient result than this basic model.

With a properly calibrated model, it’s simple to compare many scenarios.

#93 Nonplused on 10.16.21 at 11:34 pm

#83 Cowtown Cowboy on 10.16.21 at 8:44 pm

“With its high octane content, premium gasoline is more resistant to compression-induced ignition and is better for Harleys”

I suppose it depends which one you’ve got. That 1250T is definitely in the premium range at 12:1. What an engine! It’s like they redid the V-Rod and called it a Sportster. I think they are putting the same engine in the Pan American. But will these bikes capture the imagination of the younger crowd? On spec they look pretty good and the styling is good too. I’d buy me one of those Pan Americans if they weren’t so darn expensive.

#94 TalkingPie on 10.16.21 at 11:56 pm

#83 Cowtown Cowboy on 10.16.21 at 8:44 pm
49 Nonplused on 10.16.21 at 3:24 pm
#9 Cowtown Cowboy on 10.16.21 at 11:12 am

Harley-Davidson advises owners to use only premium fuel for their motorcycles. Like the Big Twins used in Harleys, large V-Twin engines have higher compression ratios than other engines do. Excessive compression in the engine will cause fuel to ignite prematurely. When this happens, the engine will run rough and may suffer extensive damage.

With its high octane content, premium gasoline is more resistant to compression-induced ignition and is better for Harleys
********************************************

I don’t know about the “big V-twins need premium” angle (nor am I so sure about your apparent confusion between pre-ignition and detonation).

My Suzuki TL1000S specified – and ran great on – 87 octane. 1,000cc V-twin, 9,000 RPM redline, 125 hp, 11.3:1 compression ratio, and that was nothing special in 1997, nor was its high 10s quarter mile time.

A casual online search suggests that H-D isn’t too keen on advertising their horsepower figures, but from what I gather a stock Twin Cam makes about 80 hp from its 1,500cc. It appears to have a compression ratio of about 10.5:1.

My Mazda 3 economy car has a static compression ratio of 13:1 and runs great on regular, no doubt in part due to its variable valve timing. It also makes nearly twice the Twin Cam’s power despite only displacing a third more. And at 5,000 RPM it doesn’t announce itself to the whole neighbourhood with a sound resembling that of a broken washing machine.

It’s amazing what’s possible when motor vehicle manufacturers don’t approach engine design like it’s 1920s agricultural equipment.

#95 604_Housing on 10.17.21 at 12:35 am

Mrs. Hamilton – like someone who was one away on all her 7 lotto numbers. Close but didn’t win the jackpot, maybe this is a lesson to us all: winning the long odds prize isn’t a win in the end.

#96 Tom from Mississauga on 10.17.21 at 1:44 am

In 2020 any Canadian equity mutual fund manager that didn’t have Shopify didn’t beat the ZCN. That’s what I’d stick with.

#97 Bezengy on 10.17.21 at 7:32 am

#82 Sail Away on 10.16.21 at 8:30 pm
#75 Dr V on 10.16.21 at 6:58 pm
#76 crowdedelevatorfartz on 10.16.21 at 7:06 pm

Re: forecasting

Hey, that’s just one very simplistic imaginary scenario with all criteria as stated. It may bear some resemblance to reality but should not be conflated with actual reality. Your imaginary scenario may differ. Spreadsheets are easy to build and modify.

——

That’s what I was looking for. Thank you very much. In my case it seems I can push it back a few years due to income splitting. I’ll need to spend some time running scenarios. For most of us I would think it’s either pay now or pay later, simple enough.

#98 Terry on 10.17.21 at 8:35 am

The last 10 years are not a speculation on higher taxes, it has already happened, Sail Away, speculate or not, I did not want to take that chance and melted down my RRSP over the last 13 years. I kept my income tax rate between 23% to 26%. Top up my TFSAs, non-registered investments and income splitting with spouse and retired early getting my early CPP is the best strategies to keep my taxes in line, 25% to 30% tax rates at most.

That could have been a costly move. Keeping registered investments growing tax-free over 13 years would have more than doubled their value, vastly exceeding the eventual taxation as they converted to RRIFs. – Garth

#99 Dwayne on 10.17.21 at 9:10 am

Meteor?

I thought it was curious that a 10lb rock hot enough to “light up the night sky” could crash through the roof of her house and land next to the “lucky” lady on a pillow. Why stop there?

Where are the burn marks on the pillow? This “meteor” most likely as a piece of blast fragment from a nearby construction project mentioned in the story.

Extraordinary claims (still) require extraordinary evidence.

If you bust rocks for a living never look a gift horse (meteor) in the mouth.

#100 millmech on 10.17.21 at 10:10 am

#78 CEF
The best one was on the reddit PFC forum on mortgage broker fraud that was removed by the moderators, fake NOA, T4 slips, employment letters. When I looked at it there was a couple hundred posts on it already before it got removed.

#101 Doug in London on 10.17.21 at 10:27 am

@Damifino, post #17:
Interesting, I thought the same thing years ago. I recall a lottery where numbered balls, 01 to 99, would roll out of a drum one at a time until 5 or 6 balls were out. I think it was Lottario, but not sure. I correctly thought that if you chose consecutive numbers the odds of winning would be the same as any other combination. That was in the 1980s, and I’ve never bought lottery tickets since.

Fast forward to recent times where the closest thing to a lottery I play is scooping up stocks and ETFs when they go on sale, like they did 19 months ago.

#102 Dharma Bum on 10.17.21 at 10:30 am

For years I was part of an office lottery pool. I went along with it just so as not to be a dick. Just to go along to get along. The buck a week was essentially a tax on being part of the office crowd. I never had any expectations of winning, nor did we ever win anything. It’s just how it was.

My old man was a lottery player. Not a crazy addict or anything, just a steady 5 buck a week guy. For at least 20 years he spent about $250 a year on various lotteries (Lottario, 649, Lottomax, etc.).

He finally hit one for $250,000.00.

It was serendipitous, as his business went bankrupt about a year earlier, and he was in pretty dire straits.

He kept playing the lottery to his dying day.

My boss’s father won twice in his lifetime. $1 million each time, about 8 years apart. He was poor, and it changed his entire family’s lives. That was a rarity, for sure. A million bucks was a lot of money in the 80’s and 90’s.

Today? Meh.

#103 KLNR on 10.17.21 at 10:33 am

@#46 Nonplused on 10.16.21 at 3:19 pm

Hockey is my favorite example because it is such a Canadian thing. For example, there are approximately 624,148 youth registered for hockey in Canada. Of the new kids that sign up every year, only 1 in 10,000 will ever play a single game in the NHL, and that mostly from the bench. Yet parents spend hundreds of thousands of dollars on their kids if they show any potential.

Pfft, even if they don’t show potential this happens.

#104 Boris on 10.17.21 at 10:49 am

#46 Nonplussed

Everyone thinks their kid is the next Gretzky. I have met so many delusional hockey parents over the years. Best just to agree with them and silently chuckle. I have even known kids who made the NHL but after bouncing around with two or three teams for a few games a season, high tailed it to Europe to bounce around in leagues over there. Russia has it right as they test their athletes with muscle biopsies and various other physical tests to determine if the athlete has world class potential. If not, they don’t invest a ruble training the athlete.

#105 crowdedelevatorfartz on 10.17.21 at 10:54 am

From the “my missile is faster than your missile” dept.

https://www.reuters.com/world/china-surprises-us-with-hypersonic-missile-test-ft-reports-2021-10-17/

#106 Left GTA on 10.17.21 at 11:03 am

Discussing withdrawl methods in retirement… what about this. We are still trying to figure it out as we are both sort of retired now. I think I need a hobby job thou. Hubby got packaged out and I quit and commuted my pension to take care of my 81 yr old Dad who had covid. He is almost fully recovered. Took 7 months. We have resp for kids but only 1 kid is going to go so she is fully covered. The other is working contracts and going to start her own business. We are not sure we have enough our plan was for me to continue to work till 55 but covid, my dad, a move out of gta with a long commute and I quit.

240,000 lira can access at 55
620,000 rrrp hubby
90,000 rrsp me
50,000 tfsa
180,000 non reg

Need 60,000

Retired 51 – 55

25,000 + 25,000 rrsps +10,000 non reg dividends

55-60

25,000 rrsp + 25,000 Lira + 10,000 non reg

60-65

25 rrsp 20 lira, cpp 15 ( we only worked to 50 so its reduced

65-

cpp 15, oas 18, rrsp 20, lira 10

#107 Doug Rowat on 10.17.21 at 11:40 am

#86 Cowtown Cowboy on 10.16.21 at 9:26 pm
#20 Ponzius Pilatus on 10.16.21 at 12:07 pm

I managed the office 6/49 Lotto Pool for 6 years for about 50 people.
Five buck each week. 250 each week. 13,500 per year.
81,000 over 6 years.
I think we totalled about 1k in winnings.

—-

Thus how Canadian provinces generate about $10 billion a year in lottery revenue.

—Doug

#108 Doug Rowat on 10.17.21 at 12:00 pm

#96 Tom from Mississauga on 10.17.21 at 1:44 am
In 2020 any Canadian equity mutual fund manager that didn’t have Shopify didn’t beat the ZCN.

—-

Yes, but it’s more than that. They’d also have own it at an overweight. Probably while simultaneously underweighting airline and travel & hospitality stocks. In other words, they would have needed to predict Covid.

—Doug

#109 San on 10.17.21 at 12:04 pm

Thank you. Very clear and well written argument.

#110 crowdedelevatorfartz on 10.17.21 at 12:13 pm

@#102 Dharma
“My boss’s father won twice in his lifetime. $1 million each time, about 8 years apart. He was poor, and it changed his entire family’s lives. ”

+++

In the mid 1980’s I worked cleaning windows on the Downtown office building in Van.
One day I went to a building and all the engineers, janitors, etc were very excited.
An old janitor that everyone had treated like crap had won several million $$$$ on the lotto and had quit.
He phoned in his resignation.
He promised to come back in two weeks to clear out his locker, grab his last pay cheque and give everyone a “gift”.
He was on the news , etc.
During the two week hiatus, all the staff that had been a$$holes to him were talking and wondering what the “gift” would be.
On Monday the rumor fest supposed it was going to be $1000 per person.
By Friday it was $5000
The following week the rumors were at fever pitch, $10,000 per person…..no no $20,000.

I watched all this with a skeptical eye,….. remembering how they had all treated the old guy.
Payday arrived.
He came in with his wife and daughter in a new car, new suit, chest puffed out with pride…. and a box……..?
A bottle of his home made wine for all his ex coworkers.
Apparently.
The looks on their faces were……priceless.
:)

#111 Sail Away on 10.17.21 at 12:51 pm

@#102 Dharma

“My boss’s father won twice in his lifetime. $1 million each time, about 8 years apart. He was poor, and it changed his entire family’s lives. ”

——-

Walter White also won a huge windfall gambling.

https://www.youtube.com/watch?v=B7DxfEMmWOQ

#112 Shawn Allen on 10.17.21 at 1:08 pm

RRSP Melt down or melt up?

That could have been a costly move. Keeping registered investments growing tax-free over 13 years would have more than doubled their value, vastly exceeding the eventual taxation as they converted to RRIFs. – Garth

***************************
100% agree with Garth here. Meltdown might work a bit if you have some years with zero other income. (pyric victory).

A better strategy for most people is to continue to let your RRSP melt-up until you need the money hopefully sometime past the age of 65.

Getting an unhealthy hate-on for paying taxes can be a very bad idea.

There are worse things than facing a high income tax bill in retirement – such as not facing a high income tax bill in retirement due to low income.

#113 Dr V on 10.17.21 at 1:49 pm

106 left GTA

Glad your Dad is recovering and congrats on you nest egg at the young age of <55.

"Disclaimer – I am neither a doctor or investment professional."

First item "Is 1.18M really enough to retire 10 years early". In my circumstance, the answer was no. I actually worked it backwards from 65. I wanted $X at that age, which also included allotments for some major
expenses. I assumed no change in value for the investments between my retirement age and 65, so any early drawdowns had to be added to the $X. So after 55, I kept adding to the nest egg until I could see the critical time and arranged for my retirement accordingly. There are still uncertainties.

You may have done that calc 1000 times already. But keep in mind how much can change over 10 years, or even just like the last 2.

Generally, your portfolio is very heavy in accounts (RRSP and LIRA) that are fully taxed on withdrawal. Any employment income now would be added to those withdrawals.

The retirement accounts look out of balance between
you and hubs, so one item to address is how to split the
income. Not sure how it all works before 65.

Also be aware of the quick drawdown on retirement savings. it's all part of an overall tax strategy particular to your situation. And remember that if one of you passes in the next 10 years or so, the OAP will be completely lost as will a good portion of the CPP. It would be a bummer if there was little RRSP money left at that time.

$10k non-reg divvies on $180k seems high given todays
stock evaluations. My bank stock yield now is around 4%. You dont mention divvies after 60 and they should be tax-free at these income levels, even if you lose a
little of the age credit at 65 that you alerted me to before (thanks!)

This is complicated enough that an advisor is warranted.
Or a tax accountant to just have the drawdown strategy reviewed if you dont want investment advice.

Best of luck to you.

I'll check my lotto tickets now. Bought for entertainment purposes only and not part of my financial plan.

#114 Repurchase Disagreement on 10.17.21 at 3:43 pm

#107 Doug Rowat

I would have hoped you would, at some point, have explained to the 50 Lottery participants that the 6-49 type games involve independent, random ball draws, so the incremental increase in chances with each ticket beyond one is effectively nil, so the per-participant cost should be just enough to buy ONE ticket per draw.

That way you would have had effectively the same odds as the $5 / week per person approach, AND the satisfaction that you were doing it ‘smart’! Would impress your clients too!

#115 Repurchase Disagreement on 10.17.21 at 3:48 pm

Sorry Doug, I see you were responding to #20 Ponzius.

Either way, my empirical lottery strategy advice stands..

#116 Nonno Nicola on 10.17.21 at 4:00 pm

For all the lottery buffs. If you want to start an office gambling pool I suggest thoroughbred horse betting. Bet every horse to win on only maiden claiming races and you will not lose more than 50% of your money over the long haul. There will be times where your group will collect on the 70 to 1 long shot and further you will cash a winner on every race.

#117 Left GTA on 10.17.21 at 4:58 pm

@ Dr. V.

Thank you. Dad is doing great! I think you said once you were an engineer. We prob should see an advisor its tricky trying to figure out how to draw down our accounts. We likely will downsize our house again and its paid off so we will have some equity we can pull out but who knows with kids these days when we can do that as they just don’t leave home! lol We also will have 100,000 in resp when kid goes to uni the other one doesn’t want to go she seems to be doing really well with dog training.