Terminally safe

For years this blog has dissed GICs.

Good reasons. First, they force money to be locked up, often for years. If you need cash quick, too bad. Second, most of them pay out interest too infrequently to be useful for income. Third, outside of a registered account (like an RRSP) every single dollar earned is subject to tax at your marginal rate. That sucks. Fourth, you may have to pay tax on interest before it’s even received. And, fifth, returns for years have been pathetic – meaning investors have steadily lost money to inflation.

Meanwhile, as we have yammered on about forever, a B&D portfolio (exposure to equities, bonds, prefs, trusts) has averaged a little under 8% over the last decade and dished up returns that are (a) completely liquid, (b) taxed at a far lower rate and (c) available for monthly income.

Hence the GIC hate.

But that has not stopped most people (who never heard of this blog, or me) from piling into brain-dead investment certificates. It’s estimated that 80% of the funds sitting in TFSAs, for example, are in ‘high interest’ savings accounts, or GICs. And now that the wizards at the Bank of Canada have raised interest rates five times, swelling the benchmark by 1,200%, some think everything has changed.

So, is a GIC paying north of 4% locked up for a year, or 5% for a five-year term suddenly a good idea? After all, only a year ago these suckers were barely alive in the 1% range.

Well, GICs still generate fully-taxable income outside of a reg account. Decent interest comes only if you lock up the money. Investors will miss the big market gains when Putin is defeated or CB interest rates stop rising. And you’re still losing money to inflation.

Despite that, a tsunami of cash is currently pouring into guaranteed investment certificates because, well, they’re guaranteed. (RBC says $10 billion just showed up.) No volatility. No surprises. Deposit insurance (which nobody will ever need). Millions of Canadians are happy to squirrel away billions of dollars despite the negatives because they’re risk-averse, financially naïve or lack confidence in the future. That is not judgmental. Just fact. (And there is a valid argument for having some GIC exposure inside the fixed-income portion of a B&D portfolio, since rates have blossomed. But, over time, this is a holding strategy. Not for growth.) If you’ve already got all the money you’ll need, GICs are ducky.

But wait. What about combining the terminal boredom of a GIC with the sex appeal of stocks? Is there such a thing?

Blog dog Emil is asking just such a question:

Thank you for all the hard work you do educating Canadians. I’ve been reading your blog for a long time and been implementing a lot of your recommendations. I would like to get your opinion on equity-linked GICs. They seem to combine limited risk with potentially unlimited reward. Some portfolios may require holding cash, why not earn some additional return? In today’s inflationary environment with still low interest rates, would it not be a great tool? Plus, Tony Robbins loves them.

(Oh, you mean the Tony Robbins who sold newsletters with this advice? “Investing in crypto as just one part of a diverse portfolio is a move that anyone can make, as long as they keep a long-term view.” He write that just before Bitcoin lost 70% of its value.)

Market-linked GICs seem to be the best of two worlds. First, capital is protected and, second, you might make lots more if stocks jump higher. Typically the certificate’s return is boosted if equity markets sit higher by the end of the GIC term than at the commencement. Given that stocks go up 80% of the time, seems like a safe bet.

But there are things to watch for. Market-linked GICs usually come with a participation rate limiting the size of returns, so a big stock rally will be only partially reflected in gains. Second, a maximum return spelled out in the fine print will also throttle the upside. Third, most market-linked GICs aren’t redeemable. You’re stuck for the term, so if equity markets correct just before your term is finished and temporarily give up big gains, you can make zero.

The biggest thing traded for capital preservation is capital appreciation. Recall where we are today – winding down a once-in-a-century pandemic, with a war in Europe, supply chain disruptions, global inflation and tightening monetary policy leading to an eruption in rates. All these will eventually get fixed. Markets will rise substantially. History shows us the outsized gains usually come in the early stages of a rally. So if your money is trapped in a GIC during those explosively buoyant times, you miss out. (And remember that equity market profits are taxed at 50%. GIC interest is Hoovered at 100%.)

To GIC or not GIC all comes down to a few things.

Are you afraid of risk and loss more than desire growth and gains? Are you happy to pay extra tax and earn the gratitude of Chrystia? Do you have enough wealth now that you can afford a safe instrument that pays less than inflation? Can you afford to lock money up for a few years with no liquidity, even if there’s an emergency? If you have confidence stocks will rise over time, why not invest in equity-based ETFs instead? Is [email protected] wooing you into the warm arms of a bank certificate? Does the world freak you out, making deposit insurance a thing?

There are valid reasons to GIC. Valid reasons to eschew them. Just be careful what you trade away for a few per cent.

About the picture: “My wife and I have followed your advice for more than a decade,” writes Matt. “Finally took the Turner canine advice (and muscling from the kids) and added a four legged vacuum to the family. Have always thought this sign would be great for your blog but now it’s a must have with River, our old soul lab, in the shot too. Thanks for everything you do. You’ve changed the course of our lives for the better.”

108 comments ↓

#1 mj on 09.11.22 at 1:52 pm

it seems to me the bank of Canada is trying to accomplish 4 things. Inflation lower, stock market lower, real estate lower, unemployment higher. When they see that change, then they will stop raising rates.

#2 Prince Polo on 09.11.22 at 2:00 pm

What are your thoughts on Covered Call ETFs?

#3 PeterfromCalgary on 09.11.22 at 2:02 pm

I totally agree locking up you money in CDs is a really bad idea. Not only will you miss out on better investments like equities but if you have an emergency you can’t get at that locked up money without huge costs.

Finally what if central banks fail to get inflation under control. Say Iran got really angry and blocked the Strait of Hormuz. Oil prices would spike, inflation would go much higher as would rates and you would be stuck with a fast depreciating purchasing power locked in. CDs are riskier than you think!

#4 Editrix on 09.11.22 at 2:13 pm

At the moment, GICs still aren’t the best bet. However, once the rates hit 7%, having them as part of your portfolio is a great idea. I fondly remember the one I had in the late 80s that was 12%. It isn’t often that my ETFs average that in a year.

#5 Flop… on 09.11.22 at 2:13 pm

Well, being Sunday, I’ve got a GIC confession to get off my chest.

Before Covid, I used to have to go to financial institution to do my TFSA contribution once a year.

Pandemic went on, people went awol, Bank started offering services online that had to be done in person before.

I used the lockdowns to overhaul my two hemisphere portfolio, upgraded my employment situation at the same time.

Got comfortable doing transactions online, one of the reasons I didn’t mind going into the bricks and mortar, was I thought it stopped me from making impulsive decisions.

Anyway I saw people talking about getting GICS north of 4% and I thought I should at least look to see what rate my team was offering.

By now you should be able to see where this is going.

A few clicks later after entering $5000 in the amount box to get me to the next page, I saw the submit button, I paused for a split second and then pushed it.

One year, 5k, 4.25%, probably stupid, but hardly fatal.

Next time I get the impulse to practice, I will mess around with my non-registered account.

Forgive me Blog Father, for I have sinned…

M48BC

#6 Mike in Cowtown on 09.11.22 at 2:15 pm

Sometimes you do things more so you can sleep at night than what makes strict financial sense.

If a portion of your net worth rots in GICs so you don’t bail out of your equities at the worst possible time, that also has a value.

#7 Quintilian on 09.11.22 at 2:35 pm

#3 PeterfromCalgary on 09.11.22 at 2:02 pm

“Finally what if central banks fail to get inflation under control.”

Inflation has a built-in self-destruct feature.

If the CB’s fail to contain inflation, it will eventually, although with much economic devastation, flame out.

A simple double digit bank rate, combined with open market operations by the CB’s would fix it.

But at a political price for whatever party is in power at the time.

#8 Dogman01 on 09.11.22 at 2:58 pm

#61 Nonplused on 09.10.22 at 3:40 pm

Great comment Nonplussed

“The game of history is usually played by the best and the worst over the heads of the majority in the middle.” – Eric Hoffer

Come for financial wisdom stay for the astute perspectives. Isn’t a public forum with Free Speech wonderful.

“Strong minds discuss ideas, average minds discuss events, weak minds discuss people.” —Socrates

#9 Dogman01 on 09.11.22 at 3:06 pm

“Own the banks, don’t owe them!” – Garth Turner

“it is a club and your not in it”

Look at the Bank of Canada Governor outright telling employers not to hike wages…..
https://www.thestar.com/opinion/contributors/2022/08/02/bank-of-canada-governor-should-stay-in-his-lane-and-not-undermine-collective-bargaining.html

There is still a path open for a normal guy with zero family wealth to cross the finish line. Turn wages into savings and saving into investments, then go a few decades with wages keeping you afloat and investments growing. – Join the Capitalist Class.

The access of Joe Sixpack to own productive companies is one of the few egalitarian mechanisms that bring legitimacy to the system we live under.

The trendline for wages in my half century experience is ever downward. There will come a point when the event horizon is crossed and the ever declining wages will not support savings, to achieve “escape from the workplace velocity” over a lifespan.

At that point our Ruling Class will have “pulled up the ladder” and then…

“War is when your government tells you who your enemy is. Revolution is when you find it out for your self.”

#10 Bezengy on 09.11.22 at 3:19 pm

A return of 4 or 8 percent really isn’t a big deal year over year. The issue is most folks don’t take the time to calculate the difference of those returns over a 30 year period, which makes it obvious what an investor needs to do.

#11 Søren Angst on 09.11.22 at 3:42 pm

#5 Flop…

Last 3 sentences, too funny. THAT was good. And you are honest.

————————

Risk. Return.

My Threadbare Portfolio weighted average β = 2.06. Its stock price YTD Time-Weighted Return (Fri. close):

+6.4%

[S&P 500 = -15%, S&P/TSX = -6.9%, Nasdaq = -23.5%, Dow = -12.1%)

The above Threadbare Portfolio return does not include dividends. My average dividend yield YTD:

27.5%

Find me a GIC that does that and I will buy it (a.k.a., β = 0).

———-

Risk. Return.

#12 Tom on 09.11.22 at 3:58 pm

Almost as bad as piling into brain dead bonds! Stocks outperform inflation in the long run.

#13 Søren Angst on 09.11.22 at 4:14 pm

#2 Prince Polo

As good an example as it gets in plain English about a well known covered call ETF, QYLD.

(YTD = -21.44% *, Div yield = 11.4%, YTD Total Return = -14.4%, USD $7.1B assets under management, MER = 0.6%).

Used to own QYLD and understood the discussion below before buying …

https://seekingalpha.com/article/4490257-skip-qyld-sell-covered-calls-qqq-yourself

* QYLD is an ETF based on the Nasdaq which has a YTD = -23.5%. QYLD based on Nasdaq value stocks that have not done well this year. Scroll to Holdings:

https://finance.yahoo.com/quote/QYLD/holdings?p=QYLD

e.g., YTD: TSLA = -25.7%, MSFT = -21%, AMZN = -21.8%, META = -50% etc.

[Thank you Ryan Lewenza for steering me clear of value stocks before the bull market and based on your info, I dumped QYLD … JIT]

#14 Søren Angst on 09.11.22 at 4:19 pm

#2 Prince Polo

* growth stocks and not value stocks, sorry.

Ryan’s fault (always blame the innocent).

#15 L Lawliet on 09.11.22 at 4:34 pm

One of these days, you should write something on split share stocks.

#16 ogdoad on 09.11.22 at 4:34 pm

Hey, my grandparents made good money on GIC’s back when there were 7-8%’ers….Guaranteed and safe. Just like you say. And they’d awaken, after a nice sleep, to a plump interest check.

Watching after tax dollars melt away in the stock market is unacceptable to those who don’t like their livelihood (years of back breaking non-sense, in some cases) being fondled with so easily. Market cannot be predicted or timed, right?…so is there adaptation to a changing world where smarty pants managers can turn a profit? Or is a 4% GIC just what the Ogtor ordered…safe and guaranteed….?

I have no idea….I just like hugs.

Og

#17 salmon rear end arm on 09.11.22 at 4:40 pm

I walked on fire at a Tony Robbins thing in West van
In the mid seventy now he’s a financial guy
Wonders never end I guess he was always into easy
Money

#18 baloney Sandwitch on 09.11.22 at 4:44 pm

These indexed linked notes are a semi-scam. Put together by math-whiz’s to take scaredy-cat investors, who think there is such thing as a free lunch, to the cleaners. You may through your nose for “protection”, not only your returns are capped but valuation is determined on a fixed date. Its like investing in a lottery ticket.

#19 Søren Angst on 09.11.22 at 4:52 pm

EU wants to cut peak electricity usage by 5% this past week (on top of the 15% nat gas reduction due to the war and of course tax windfall energy profits).

June, July I consumed 966 kWh (A/C ablaze), so the MAZ for me yearly is:

about 6,000 kWh. Now they want me to trim 5% off of that.

Where Italia (and me) are going to squeeze out another 5% is beyond me. Easier for other countries like Germany & France.

https://ourworldindata.org/grapher/per-capita-energy-use?tab=chart&country=CAN~ITA~DEU~FRA~NLD~ESP~SWE

PS: all you “I am so GREEN ’cause I own an EV” shysters. Tesla 3 calcs:

Avg km per year = 20,050
kwh/100 km = 21.25
Tesla Model 3 kwh/yr = 4,260.625
Avg energy use per Cdn = 101,691 kWh/yr
Avg energy use per GREEN EV OWNERS in Canada = about 106,000 kWh/yr

Avg energy use by Søren Angst (no EV necessary, incl. nat gas) = 6,800 kWh/yr

What I think of you EV owners in Canada and self-proclaimed GREEN advocates …

🐷 🍁

#20 Toronto Ghost Town on 09.11.22 at 5:12 pm

Take a GIC over a condo always. No costs, no maintenance, no interest, no repairs, no strata, no replacements, no irresponsible neighbours causing special levies for everyone, no property taxes etc.
Buy them to save yourselves hassles and ongoing monthly costs for nothing in your pocket.

#21 Sarcastic Sally on 09.11.22 at 5:15 pm

The best investment is in Canadian real estate. We have a constant supply of greater fools coming to Toronto to bid war a rental apartment at Jane and Finch. Toronto is a world class city with four subway lines and polite citizens.

#22 NOSTRADAMUS on 09.11.22 at 5:20 pm

TRANSITORY, YOU SAY?
According to the central bankers and various investment guru’s, the decline in real estate and stock valuations is only transitory, meaning, of a brief duration, temporary. The message, heard loud and clear by so many speculators, do not sell. In fact, borrow more and add to your portfolio exposure. Good times always come back to those who stay fully invested. Look at my cherry picked graphs. What more proof do you need???
Hmmm— The heads of the central banks, all teary eyed, with hats in hand are now coming forward to offer their condolences to the Wee Little People for an issue they helped to create with their artificial low interest rates. It would appear we have a credibility issue at play. This brings to mind a quote by, Charles Bukowski, “If you managed to deceive a person, this does not mean that he is a fool, it means that you were trusted more than you deserve.” Whoa, heavy man!
Could it be possible that the prudent danced to their own drum and put their powder into Cash, lowly Gic’s, Hedging, Bartering, and Fibbing like a daughter coming home after midnight??? If so, these same prudent people will soon be in a position to take their cash out of hibernation and warp speed far beyond their asphyxiated fully invested brothers. Finally the voice of reason.

#23 Sam on 09.11.22 at 5:26 pm

Inflation adjusted historical rate of return of S&P 500 (proxy for all markets) is 5.69% (*source is officialdata.org). The last decade has been an anomaly due to suppressed rates and printing press (look at any market index chart and pretty flat up to 2009).

#24 Victor Llearna on 09.11.22 at 5:39 pm

GIC’s are the perfect investment for STUPID sheep

#25 Grumpy Panda on 09.11.22 at 5:40 pm

Two off topic news items.. Nice young couple decided to have their wedding at Dufferin Mall in Toronto. Reception held at Cinnabon. That’s one way to save a small fortune the wedding industry won’t want catching on. second item was two small dogs that were stolen have been returned to the owner. Still at large is the male perp approximately 40 yrs old, riding a black bicycle. No mention of a ponytail.

#26 Sam on 09.11.22 at 5:42 pm

You don’t grow wealthy spending decades investing in the market hoping you’ll be able to enjoy the fruit of your labor at 70 years old. The financial institutions do. Start a business. Invent something useful. Own income producing property.

#27 Darrellboigo on 09.11.22 at 6:00 pm

DELETED

#28 Reality Check on 09.11.22 at 6:01 pm

Sam on 09.11.22 at 5:26 pm
Inflation adjusted historical rate of return of S&P 500 (proxy for all markets) is 5.69%
—————-

An inflation adjusted long run rate of return of 5.69% for the S&P is excellent and dwarfs all other conventional investments. Bonds over the long term, depending on risk, yield a real return if 2-4% and real estate about the same. And by long term I mean decades, not 5 years.

Now if you want more than 5.69% you’re going to have to figure out the next hot unconventional investment “a La” Beanie Babies or some new digital currency/NFT-like scam.

#29 Søren Angst on 09.11.22 at 6:03 pm

#23 Sam

You forgot to mention that if dividends were reinvested, like I do, the S&P 500 inflation adjusted return is, since “1900”:

9.75%
6.6% w/o DRIP

https://www.officialdata.org/us/stocks/s-p-500/1900

or since 1957 *:

6.25%
10.14% DRIP

https://www.officialdata.org/us/stocks/s-p-500/

To begin with the author’s 1900 calculations are DUBIOUS since the S&P 500 was introduced in

* March 4, 1957

as a stock market index to track the value of 500 large corporations listed on the New York Stock Exchange.

The Composite Index (and later Standard & Poor’s Composite Index), had been launched on a small scale in 1923.

———————-

Curious, but where did you get:

“5.69% (*source is officialdata.org)” ???

And, the S&P 500 is not a “proxy” for “all markets”. Google Search, bearing in mind the above:

“What is the Russell 2000?”

#30 jim on 09.11.22 at 6:10 pm

Gas prices have gone up, so lets lobby to have the bumpers and airbags removed to make vehicles lighter!

https://financialpost.com/real-estate/mortgages/bank-of-canada-interest-rate-hike-mortgage-stress-test

#31 THE DANDADA on 09.11.22 at 6:16 pm

DELETED

#32 oops on 09.11.22 at 6:23 pm

#17 salmon rear end arm on 09.11.22 at 4:40 pm

Come again?

#33 Mr Fox on 09.11.22 at 6:23 pm

I’ve never used a GIC but I understand why it’s a comfortable instrument.
Let’s say you need the money in 1 year (buying a house or whatever else), putting them in a GIC is by far less risky. Let’s take this year’s example: a BnD portfolio is -15% while a GIC can pay a 2% without any risk.
And for 1M, would you choose -150k or +20k?

A BnD portfolio, like a real estate investment, is a long ride. Invest for at least 5 years and you’ll be fine. Except when you buy in Bunnypatch…

#34 Mr Fox on 09.11.22 at 6:31 pm

#21 Sarcastic Sally on 09.11.22 at 5:15 pm

Funny thing: recently I spoke to few of my friends (two different gangs not knowing each other). Most of them are on hold and ready to buy a new rental property once they see the sign that the rates have peaked. All of them have at least 1 and some have 3 investment properties and guess what: they’re totally fine. When tenants leave they jack up the rents so they never lose. And since the population of this city (and country as well), grows faster than the houses/condos are built, you either go to live in Bunnypatch or pay $2700 for a 1bd condo downtown..

#35 Tony on 09.11.22 at 6:36 pm

Re: Deposit insurance (which nobody will ever need).

Are you kidding me? The chance of banks, credit unions or trust companies going insolvent or bankrupt are extremely high. The good part is this isn’t 1997 and everything is computerized so you can get redemption in months instead of years. I wouldn’t put more than a million dollars into any one Manitoba credit union which includes interest.

#36 espressobob on 09.11.22 at 6:37 pm

Money market ETFs are starting to look attractive when it comes to cash positions in a diversified portfolio.

Their liquid and pay monthly. Interest rate hikes only heighten returns. GICs are usually locked in not allowing flexibility between trades.

Straight cash suffers.

#37 Wrk.dover on 09.11.22 at 6:37 pm

Better to get 0% until November 1st, then get more % interest beyond. Even then, not much point in locking in more than 33% of your GIC allotment then, because things will be juicier after the Dec 7th hike, and so on.

On the other hand, the markets will rejoice Putin’s fall, while the GIC return won’t reflect it, as Garth stated clearly.

#38 Ponzius Pilatus on 09.11.22 at 6:40 pm

137 Linda on 09.11.22 at 2:59 pm
#103 ‘Ponzi’ – challenging the courses would be ideal. For instance, why insist a qualified doctor retake every single course? Why not have them write a qualifying exam plus have them intern under a Canadian doctor for say one year to ensure they are conversant with medical mores here? Instead the obstacles are unduly onerous. I for one find it interesting that if an immigrant doctor is willing to practice in a remote, rural community no issues, but all hell breaks loose if they try to move to an urban centre. Suddenly their qualifications to practice come under scrutiny. Calls into question the rationale behind the rules, no?
———————————
Personally, I think most professional should be sent where they are needed most, first 137 Linda on 09.11.22 at 2:59 pm
#103 ‘Ponzi’ – challenging the courses would be ideal. For instance, why insist a qualified doctor retake every single course? Why not have them write a qualifying exam plus have them intern under a Canadian doctor for say one year to ensure they are conversant with medical mores here? Instead the obstacles are unduly onerous. I for one find it interesting that if an immigrant doctor is willing to practice in a remote, rural community no issues, but all hell breaks loose if they try to move to an urban centre. Suddenly their qualifications to practice come under scrutiny. Calls into question the rationale behind the rules, no?
———————-
Personally, I believe most professional immigrants should be sent where they are needed most, first.
Even up North.
To proof that they are here not only for the mullah, and a cosy lifestyle.
Having said that, immigration is a touchy subject, with no perfect solution.
To show that they

#39 crowdedelevatorfartz on 09.11.22 at 6:43 pm

@#21 Sarcastic Sally
“Toronto is a world class city with four subway lines and polite citizens.’

+++
Careful.
BC’s Lower Brainland might take offense.
They’ve been telling themselves they’re “world class” for about 25 years.
The choking smoke this weekend reducing visibility to less than 2 miles….. from the forest and dump fires….says otherwise.

#40 Tony on 09.11.22 at 6:53 pm

Re: #4 Editrix on 09.11.22 at 2:13 pm

I had one at London Trust & Savings Corporation one year 12.125 percent October 26th 1990 limit up $53,500. They only insured $60,000 back then. I had a lot better rates in the early 1980’s.

#41 Ponzius Pilatus on 09.11.22 at 6:57 pm

Zehn Prozent der Cafés und Restaurants in Italien droht Schließung
Wegen der hohen Energiepreise geht auch in Italien die Angst vor einer Pleitewelle um
—————————
Dolce.
I got the above article from the Austrian “Kurier”.
Says: 10 percent of Italian Restaurants and Cafes could face bankruptcy, because of high energy prices.
Tell us it ain’t so.

#42 crowdedelevatorfartz on 09.11.22 at 7:03 pm

My my my

The Russian Nationalists are whipping themselves into a frenzy.
Screaming for “Total War” while Moscow celebrates it’s birthday and Putin opens a new Ferris wheel in the city…..
Bizarre or perhaps no one dares tell him the truth.
Corruption has gutted his military.

https://www.reuters.com/world/europe/russian-nationalists-rage-after-stunning-setback-ukraine-2022-09-11/

Stay tuned.
This is going to get ugly.

#43 Ronaldo on 09.11.22 at 7:05 pm

#21 Sarcastic Sally on 09.11.22 at 5:15 pm
The best investment is in Canadian real estate. We have a constant supply of greater fools coming to Toronto to bid war a rental apartment at Jane and Finch. Toronto is a world class city with four subway lines and polite citizens.
——————————————————————
Like Ponytail, right? Garth might have something to say about that.

#44 Ponzius Pilatus on 09.11.22 at 7:06 pm

#12 Tom on 09.11.22 at 3:58 pm
Almost as bad as piling into brain dead bonds! Stocks outperform inflation in the long run.
—————————-
Well, that’s all good on paper.
But, as one famous person said: “in the long run, we’re all dead”.
Let’s not be too harsh on the GICers.
There are worse things in life than putting your hard earned money in GICs.
Voting for PP, for instance.

#45 Reynolds 531 on 09.11.22 at 7:10 pm

Market linked GICs return the average index level during the term. So a crash would only partially hit returns.

But just the same bad product for most people.

#46 crowdedelevatorfartz on 09.11.22 at 7:16 pm

The beginning.

https://www.burnabynow.com/local-news/bc-sheds-28k-jobs-in-august-as-economy-taps-brakes-5800505

#47 PeterfromCalgary on 09.11.22 at 7:27 pm

#19 Søren Angst on 09.11.22 at 4:52 pm

“EU wants to cut peak electricity usage by 5% this past week (on top of the 15% nat gas reduction due to the war and of course tax windfall energy profits).”

Too bad we got a Prime Minister who has been obstructing all Canadian fossil fuel projects including LNG. Otherwise we could help Europe and hurt Putin right now. Hopefully we will replace Justin Trudeau with Pierre Poilievre soon!

Sadly, that will be too late to help Europe with it present energy crises. Prime Ministers with delusional ideas on energy have consequences.

#48 yvr_lurker on 09.11.22 at 7:53 pm

Well this is the first post you have made that is not outright negative on GICs. I put a little less than 100K of new $$ that I had not expected into a GIC for roughly 4% locked in until July 2023. I have a sense that there is much more pain to be experienced in the markets over the next year and so did not want to experience a further 10% decline. Still if you look at ZBAL or ZGRO then it is essentially at 0% gain since December 2019. This is a fact. If one expects 5% growth per year, in December 2022 we will be down by 15% from what one would expect.

I’d say wait for a bit as nothing seems solid anywhere.

There are many excuses to be a wuss. Don’t feel bad. – Garth

#49 TurnerNation on 09.11.22 at 8:08 pm

Guys we are so close to normal. What our rulers are gunning for.
Examine the Economist Magazine’s latest UK story picture.
Screams normalcy:

https://www.economist.com/img/b/834/469/90/media-assets/image/20220910_LDD001.jpg


— Permanent fictional State of Emergency?

.‘We’re in a state of emergency.’ Parents frustrated by slow pace of tackling racism in Peel schools (thestar.com)

https://www.politico.com/news/2022/09/09/new-york-declares-polio-state-of-emergency-00055925
“New York declares ‘state of emergency’ as polio continues to spread”

————–
The Rules were designed with permanence, in the Former First World Countries. Smile germans, while you get frozen and starved out this wintertime.

https://www.schengenvisainfo.com/news/germany-to-impose-new-nationwide-covid-rules-from-october-1/
The German authorities have officially announced that the country will introduce new nationwide Coronavirus protection measures for autumn and winter.

#50 TurnerNation on 09.11.22 at 8:25 pm

2020/21 was training for permanent Climate Lockdowns. Essential activities only Comrades!

.Switzerland is considering jailing anyone who heats their rooms above 19C for up to three years if the country is forced to ration gas due to the Ukraine war. The country could also give fines to those who violate the proposed new regulations. (dailymail.co.uk)

———-

We pay high taxes for our social safety net
Also never forget we are Superior to USA. Always.

https://old.reddit.com/r/toronto/comments/xaivqf/911_call_experience/
“I had to call 911 for medical help for a person who was lying unconscious at an intersection downtown. It took frickin’ 8-9 mins of hold time to firstly get in touch with the operator.

“I don’t know what happened over Covid, but waiting on hold after dialing 911 for 5+ minutes is the norm now.

“I called a couple weeks ago – I had to wait about 10 min too. ”

“A neighbour had a medical emergency and we had to call 911, we’re on hold for at least 5-10 min…”

—-
—- But How’s the “hospital capacity” looking? $4.2 million for a ‘voluntary’ isolation site.
You’ll find that many hotels in downtown cores now are under Government control/occupation — as “isolation’ centres and permanent homeless encampments.

https://www.cbc.ca/news/canada/windsor/migrant-worker-isolation-site-announcement-interrupted-protestors-1.6558632
Ottawa setting $4.2M aside to keep hotel isolation site in Windsor running for migrant workers
Chief of Essex Windsor EMS, Bruce Krauter, said the isolation site would continue to be at a hotel,

#51 Ustabe on 09.11.22 at 8:26 pm

#26 Sam on 09.11.22 at 5:42 pm

You don’t grow wealthy spending decades investing in the market hoping you’ll be able to enjoy the fruit of your labor at 70 years old. The financial institutions do. Start a business. Invent something useful. Own income producing property.

Bingo. When I first joined in to the steerage section the ongoing topic was side hustles, what a cubicle dweller trading hours for a salary could do to better themselves.

Truly amazing how many could not grasp the idea of starting up their own gig while holding onto the main job.

#52 yvr_lurker on 09.11.22 at 8:41 pm

There are many excuses to be a wuss. Don’t feel bad. – Garth
——

Still have a bet that the TSX will be below 21 by Xmas and that there is more pain to come. I am happy with what I did, as you seem to chronically under-estimate the downsides of the market in a short term scenario. In July 2023 it may be different and will jump back in. Don’t need any further 8% losses in the next year.

Short term is irrelevant. Time you learned that. – Garth

#53 THE DANDADA on 09.11.22 at 9:02 pm

DELETED

#54 Balmuto on 09.11.22 at 9:03 pm

To me there is a place for GICs but only as an alternative to a savings account. When you want to park your money somewhere for X amount of time. You don’t need to access the money before X period is up, but you want the money to be there as soon as X period ends.

So, for example if you have enough money to pay off your mortgage at the end of its term. You don’t want want to pay it off now and incur financial penalties (especially when rates are much higher). But you want to pay it off when it comes due so you don’t have to renew at higher rates. So you park the money in something safe like a GIC that matures on or just before the mortgage renewal date.

For long term investing though, I agree there are better alternatives.

#55 CJohnC on 09.11.22 at 9:12 pm

#37 workdrover…. you don’t have to opt for 0%

you can get 180 day GIC and turn it over at every rate increase until interest rate stability. Currently running about .90 below a 1 year rate which puts them at 3.50%.

#56 Shawn on 09.11.22 at 9:14 pm

Don’t ask the McDonald’s franchise owner what he thinks of Wendy’s and expect an unbiased answer.

#2 Prince Polo on 09.11.22 at 2:00 pm Asks Garth:

What are your thoughts on Covered Call ETFs?

#57 Shawn on 09.11.22 at 9:32 pm

Pierre Poilievre?

I always liked SOME of what he says. I always thought he was a great speaker. But I always thought some of the things he calls for are a bit nutty.

But overall, I have to respect the man. Maybe he is electable as Prime Minister after all.

#58 crowdedelevatorfartz on 09.11.22 at 9:32 pm

@#44 Ponzies Political Predictions
“There are worse things in life than putting your hard earned money in GICs.
Voting for PP, for instance.”

+++
Time will tell.

Let’s see how Trudeau and his profligate pal Jaggy handle the looming interest rate hikes, the job slow down, inflation, war, a Covid surge…..etc etc etc.

The fiscal belts must be tightened or the dollar drops.
Dismal medical? Can’t find a doctor?
Never mind, we have Free dental!
Until the debt is so big even the Liberal Woke apologists can’t ignore it.

Sunny daze….are done.

#59 Steven Rowlandson on 09.11.22 at 9:53 pm

“Does the world freak you out?”

In a lot of ways it offends and horrifies. There is a lot that ought not be allowed.

#60 Doug t on 09.11.22 at 9:55 pm

#58 Fartz

Amen brother – tick tock tick tock – time will tell

#61 Doug t on 09.11.22 at 10:02 pm

#48 yvr_lurker on 09.11.22 at 7:53 pm
Well this is the first post you have made that is not outright negative on GICs. I put a little less than 100K of new $$ that I had not expected into a GIC for roughly 4% locked in until July 2023. I have a sense that there is much more pain to be experienced in the markets over the next year and so did not want to experience a further 10% decline. Still if you look at ZBAL or ZGRO then it is essentially at 0% gain since December 2019. This is a fact. If one expects 5% growth per year, in December 2022 we will be down by 15% from what one would expect.

I’d say wait for a bit as nothing seems solid anywhere.

There are many excuses to be a wuss. Don’t feel bad. – Garth

LMAO OMG YOU CAN BE BRUTAL GARTH – you ever consider standup comedy Don Rickles style

#62 kommykim on 09.11.22 at 10:11 pm

I switched my fixed income stuff from short-bond ETFs to a GIC ladder / HISA combo about 2 years ago. x4 1Yr GICs staggered so that one of them matures every 3 months and the HISA is accessible at any time. This means I have access to 1/5 of my fixed income portion at any time and 2/5 at 3 month intervals. (4 GICs and HISA make up the 40% of my fixed income stuff in each 60/40 RRSP/TFSA portfolio)
My taxable account is different with a mix of preferreds, HISA, and GICs for the FI stuff…

#63 Ponzius Pilatus on 09.11.22 at 10:14 pm

Pickle ball is going crazy in the Lower Mainland.
Joint a club today.
Was always a decent
ping pong and tennis player, so pickle ball is not to hard to learn.
There was some issues a couple of years ago with the tennis people.
So the local government stepped in and redrew the lines so that both sports can be played on the same court.
They even build a new one close to my place.
Our tax dollars at work, as FURZ likes to say.

#64 baloney Sandwitch on 09.11.22 at 10:19 pm

#26 Sam on 09.11.22 at 5:42 pm
You don’t grow wealthy spending decades investing in the market hoping you’ll be able to enjoy the fruit of your labor at 70 years old. The financial institutions do. Start a business. Invent something useful. Own income producing property.

Tell that to Warren Buffett. Stocks are property. They represent ownership interest in businesses and not pieces of paper to be traded.

#65 Quintilian on 09.11.22 at 10:19 pm

#34 Mr Fox on 09.11.22 at 6:31 pm
“And since the population of this city (and country as well), grows faster than the houses/condos are built, you either go to live in Bunnypatch or pay $2700 for a 1bd condo downtown..”

Mr Fox has friends with titan brains.

They hold the theory that supply cannot ever catch up to demand.

#66 The Gold Standard on 09.11.22 at 10:31 pm

Garth, you need to grow a ponytail.

#67 Cecil on 09.11.22 at 10:34 pm

I think it depends on your position. I’m retired with a good pension and substantial cash. I do not need to or want to risk all my money in the market just before a recession. I park it in GICs and will reinvest some of it when the time appears right.

#68 The Gold Standard on 09.11.22 at 10:37 pm

Split share funds: I’d avoid these like the plague (or Covid) they are highly leveraged (like 2X) and have expensive fees and the values erode over time. The commons can stop paying dividends if the NAV drops below a predetermined value.

Covered Call ETFs: I’d avoid these because they tend to erode in value over time and they have high fees. These structured products are great for the guys running them but not so good for the investors buying them. Just buy regular ETFs instead.

#69 Blobby on 09.11.22 at 11:04 pm

Can I be a wuss in fearing a future of PePe with his absolute nonsense understanding of .. er.. anything?

How can Canada get a “real” Conservative party again?

I want fiscally Conservative, socially progressive.. How hard is that?

What is this nonsense – hasnt Canada learned from Trump/Boris?

#70 Ronaldo on 09.11.22 at 11:38 pm

It’s not hard to see why a lot of people are ready to throw in the towel on the B&D portfolio and go into GIC’s (I never have nor ever will ) when they look at their 60/40 down 10 to 12% for the year and all of the gains for 2021 gone. Now sitting at a level around November of 2020 which likely would give them a return on their portfolio of around 0% since that time.

We have a lot of ground to make up to even get back to where we were at beginning of 2022. This downturn is going to make the 20% haircut in March of 2020 look like a walk in the park. I can see the market down another 8 to 10% before we hit bottom.

Not a big deal for those who do not need the funds like ourselves since we can wait this out but those that depend on their portfolio to produce their monthly income must be feeling quite depressed right now.

#71 Capital One on 09.11.22 at 11:46 pm

Maybe I’ve missed something along the way – but isn’t comparing today’s inflation rate to today’s GIC a strange comparison?

Inflation is a measure of the increase of price of goods and services over the previous 12 months. So if today’s inflation rate is 8%, that means things today cost 1.08 x the cost of things one year ago.

GICs are forward-looking. So if you buy a one-year GIC today at 4%, in one year, you’ll have 1.04 x the amount you invested.

Inflation is a lagging indicator; GICs are looking forward.

So … shouldn’t we be comparing the expected inflation rate one year from today to today’s one-year GIC rate? If so, aren’t GICs now worthy of inclusion in a B&D portfolio – say 2 to 4%?

Thanks,
CO

#72 Adam on 09.12.22 at 12:06 am

Everytime a GIC thread like this pops up, I will reiterate that there is nothing wrong, per se, with being a “wuss” if it helps one sleep at night. To each their own. Obviously equities will outpace GIC’s in the long run but it’s also possible to have a decade where they don’t.

#73 Damifino on 09.12.22 at 12:40 am

#70 Ronaldo

…but those that depend on their portfolio to produce their monthly income must be feeling quite depressed right now.
——————————-

Not at all. I’ve seen it many times before. My investments have payed my way for the past 15 years (retired at 56). I’ve preserved my original capital and indeed added significantly to it over that time.

It’s all about the long term whether you draw funds or not. Dividends and interest still flow. Paper losses are just that, unless you panic and make them real ones.

Build up an economic engine in your productive years, hire true professionals to keep it finely tuned as you age, then sit back and enjoy more important things.

#74 Damifino on 09.12.22 at 12:52 am

#57 Shawn

But overall, I have to respect the man. Maybe he is electable as Prime Minister after all.
———————————

Sure hope so. Consider how horrifying the alternative. Another stultifying term of boy-king wokeness.

I think I’d rather be eaten by fire ants.

#75 gregonomic on 09.12.22 at 1:51 am

Bitcoin has returned 70% annually, over the last 7 years. That doesn’t necessarily make it a good investment right now.

I know GICs are just another tool banks use to part fools with their savings, but 4% is a better dividend yield than most other asset classes at the moment.

How can other asset classes maintain their valuations when their dividend yields are so much lower?

Would appreciate a blog post on this Garth – when, if ever, should we use dividend yield to guide our investment choices?

#76 SoggyShorts on 09.12.22 at 2:53 am

I got some kind of magical GIC from TD at the absolute bottom in 2008.

$4,000 locked in for 5 years with a chance of 0% returns and somehow tied to equities.. or maybe the bank’s own stock?
iirc I got $8k at maturity.

When I asked about getting another one the guy laughed.

#77 Prince Polo on 09.12.22 at 7:02 am

Thanks Soren!

#56 Shawn on 09.11.22 at 9:14 pm
Don’t ask the McDonald’s franchise owner what he thinks of Wendy’s and expect an unbiased answer.

#2 Prince Polo on 09.11.22 at 2:00 pm Asks Garth:

What are your thoughts on Covered Call ETFs?

What if the McDonald’s owner is giving away dietary positioning for free? Is it still a bad idea to ask about nutritional advice?

#78 Dirksten Franks on 09.12.22 at 8:10 am

Looks like MSM is already talking about details re. post-succession currency etc

https://globalnews.ca/news/9116935/queen-elizabeth-death-canada-currency-stamps/

After a suitable period of respect and condolence, maybe is time to have national discussion on putting Canadians on the currency rather than foreigners. An inclusive selection could include indigenous, French and English Canadians…….Big Bear, Red Crow,Gordie Howe, Neil Young, Guy Lafleur, and others as possible candidates. Time for the country to heal and embrace it’s roots

#79 Dharma Bum on 09.12.22 at 8:11 am

Garth:

Is it better to be terminally safe, or terminally pretty?

I figure that, being brutally handsome, you would know.

Life in the fast lane.

#80 crowdedelevatorfartz on 09.12.22 at 8:27 am

@#63 Ponzies Pre Pickleball Puff
“Pickle ball is going crazy in the Lower Mainland.
Joint a club today.”

+++
Well, never underestimate the power of marijuana to influence even the most staid of retirees.

Pickleball.
Invented in Seattle in the 1970’s I believe.
Ignored by almost all until now.
Seems some Victoria neighbors detest the sound of a hard plastic ball smacking the oversized wooden paddles.

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwioheynn4_6AhUiIX0KHXtBB8oQwqsBegQIAhAB&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D1HDrjZQWyE4&usg=AOvVaw0dYlNU_Cbxpq4ZtzdfL5Sa

I worked at an office building in downtown Van in the 1980’s that had a pickleball court on the roof.
Pre Internet.
It took us ages to source out the Pickle balls and paddles from the company to order new ones.

A few people played until the seagulls nested….
All the tennis players looked down upon it in their sport snobbery.
Somewhat amusing.
Another fad.
Hopefully the inventors didnt sell their rights to the game years ago.
They might finally make some money from it.

#81 crowdedelevatorfartz on 09.12.22 at 8:34 am

@#74 Damfino
“Another stultifying term of boy-king wokeness.

I think I’d rather be eaten by fire ants.”

+++
Yep.
Another term of the Son-King would have me staring at the sun.
Perhaps the fire ants would happen after the ear bug?

https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwi5yO7qoI_6AhURoFsKHXxmB4sQwqsBegQIBRAB&url=https%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D3i42Smtbmeg&usg=AOvVaw2PcAniBsnapEQyC8RgKPSV

#82 the Jaguar on 09.12.22 at 9:03 am

#74 Damifino on 09.12.22 at 12:52 am
Sure hope so. Consider how horrifying the alternative. Another stultifying term of boy-king wokeness. I think I’d rather be eaten by fire ants. ++++

Oh he’s electable for sure. He’s “edgy”, and this is a quality that appeals greatly to the Mills and GenX. He’ll gain seats in Quebec, too. It will also come as a surprise to the moderates in the party that he will bring unity within. Look for a majority win in the next election. If only he didn’t have those shark eyes. A new hair style would also soften his image. Pierre, just call the Jaguar for more advice on winning.

#83 crowdedelevatorfartz on 09.12.22 at 9:21 am

Yoo hoo Ponzie.

The knives are out for Caesar…
Do you think the Czar will go quietly?

https://www.msn.com/en-ca/news/world/we-ask-you-to-relieve-yourself-of-your-post-kremlin-officials-have-begun-a-mutiny-against-vladimir-putin/ar-AA11HTuq?ocid=winp1taskbar&cvid=8d36986f087146cfaa5114976820b090

#84 Tony on 09.12.22 at 9:24 am

Re: #75 gregonomic on 09.12.22 at 1:51 am

Before the 1990’s the stock market would implode if it saw the mismatch between CD rates and dividend rates we see today. Everything has been a fairy tale since around 1993. The plunge protection team earns its money.

It does not exist. – Garth

#85 Shawn on 09.12.22 at 9:31 am

Don’t ask the competitor

#77 Prince Polo on 09.12.22 at 7:02 am
Thanks Soren!

#56 Shawn on 09.11.22 at 9:14 pm
Don’t ask the McDonald’s franchise owner what he thinks of Wendy’s and expect an unbiased answer.

#2 Prince Polo on 09.11.22 at 2:00 pm Asks Garth:

What are your thoughts on Covered Call ETFs?

What if the McDonald’s owner is giving away dietary positioning for free? Is it still a bad idea to ask about nutritional advice?

*********************************
Never ask one business owner if his competitor has a good product. They are rarely receptive to such a question.

And Garth has generally been hostile to any approach but his own.

Hostile is a nasty word. My mission is to keep people from doing dumb things with their money. That is more akin to charity than hostility. – Garth

#86 Party Insider on 09.12.22 at 9:55 am

We are estimating that around 30-40% of the 670,000 registered CPC voters, mostly voting for Pierre P, were actually Liberal/NDP and also PPC and Green operatives who paid fees to get a vote. Internal data is being examined vigorously right now.

The last leadership vote only had about 270,000 signed up. Something’s up. Stay tuned.

#87 Shawn on 09.12.22 at 9:56 am

GICs versus Inflation?

#71 Capital One on 09.11.22 at 11:46 pm
Maybe I’ve missed something along the way – but isn’t comparing today’s inflation rate to today’s GIC a strange comparison?

Inflation is a measure of the increase of price of goods and services over the previous 12 months. So if today’s inflation rate is 8%, that means things today cost 1.08 x the cost of things one year ago.

GICs are forward-looking. So if you buy a one-year GIC today at 4%, in one year, you’ll have 1.04 x the amount you invested.

Inflation is a lagging indicator; GICs are looking forward.

So … shouldn’t we be comparing the expected inflation rate one year from today to today’s one-year GIC rate? If so, aren’t GICs now worthy of inclusion in a B&D portfolio – say 2 to 4%?

Thanks,
CO

*****************************************
ABSOLUTELY! Great comment.

#88 crowdedelevatorfartz on 09.12.22 at 9:57 am

“My mission is to keep people from doing dumb things with their money. ”

+++

A never ending mission.

#89 Shawn on 09.12.22 at 10:00 am

Hostile is a nasty word. My mission is to keep people from doing dumb things with their money. That is more akin to charity than hostility. – Garth

*********************************
Agreed, but meanwhile a whole generation of Nice Ladies at the Bank have cried themselves to sleep after reading this blog.

#90 chalkie on 09.12.22 at 10:05 am

Gic’s are like setting and watching paint dry, boring and taxed to the hilt. Did you know that while you are waiting for your GUARANTEED 4 or 5% GIC interest in a few years, the financial intuitions have your money to do what they want with, they put in the open markets and walk away with 50, 70 and over 100% returns on your stashed away money, so did you get another share of their extreme profits, don’t think so.

You need to get up early to get ahead of a bank, take a few courses, educate yourself in how money works and invest where the banks do, it’s your money and don’t throw it to the wind, “there is an old saying, a fool and his money, there are 100 born every second somewhere”.

#91 Shawn on 09.12.22 at 10:08 am

Who increases the money supply?

Want someone to blame for “money printing”

It’s not been the central bank really but rather the commercial banks.

See the release from Stats Canada just this morning:

“Financial sector supply of funds increases

Financial corporations delivered $171.9 billion in funds to the economy through financial market instruments in the second quarter, an increase of $96.7 billion from the previous quarter. The supply of funds was primarily in the form of mortgage (+$60.5 billion) and non-mortgage (+$55.6 billion) loans, as well as Canadian bonds and debentures (+$33.8 billion).”

https://www150.statcan.gc.ca/n1/daily-quotidien/220912/dq220912a-eng.htm?CMP=mstatcan

#92 Shawn on 09.12.22 at 10:31 am

How and where to open a Euro Dollar and/or British Pound savings account?

With the Euro and the British pound both down substantially even in Canadians dollars, Canadian travelers may want to open Euro or Pound savings accounts.

Do any of the Canadian banks offer a simple what to do that?

Surely with all the immigrants in Canada with ties to their home countries this should be routine for many currencies but I don’t think it is routine at the big 5 banks, is it?

We could just get some currency at the bank (while the exchange rate seems good) and stick it in a home safe if we have one but then we give up the interest that we can earn on cash these days.

#93 Ponzius Pilatus on 09.12.22 at 11:09 am

92 Shawn on 09.12.22 at 10:31 am
How and where to open a Euro Dollar and/or British Pound savings account?

With the Euro and the British pound both down substantially even in Canadians dollars, Canadian travelers may want to open Euro or Pound savings accounts.

Do any of the Canadian banks offer a simple what to do that?

Surely with all the immigrants in Canada with ties to their home countries this should be routine for many currencies but I don’t think it is routine at the big 5 banks, is it?

We could just get some currency at the bank (while the exchange rate seems good) and stick it in a home safe if we have one but then we give up the interest that we can earn on cash these days.
———-+———————
Good suggestion.
We’re planning a big Family trip to Europe next year.
I’ll do some calculations and see if it’s worthwhile.
Thanks

#94 Linda on 09.12.22 at 11:31 am

While I can understand the allure of GIC’s – a ‘guaranteed, safe’ investment in these uncertain times does hold a lot of allure – the fact remains that inflationary forces makes GIC’s a less than prudent choice for long term investing. The BoC is trying to rein in inflation by raising rates, which is why GIC’s are paying more. Yet the federal government is announcing new measures that will potentially add more fuel to the inflation fire. Meanwhile, folks are piling on debt. Today’s StatsCan announcement about increasing household debt levels notes that a lot of said debt is driven by mortgages. Why do I have this mental vision of an out of control financial vehicle about to crash dramatically & burst into flames? StatsCan says Canadians owe a $1.82 for every dollar in disposable income. Shouldn’t this be a cause for concern?

#95 rampant inflation on 09.12.22 at 11:43 am

#71 Capital One on 09.11.22 at 11:46 pm

Maybe I’ve missed something along the way – but isn’t comparing today’s inflation rate to today’s GIC a strange comparison?

Inflation is a measure of the increase of price of goods and services over the previous 12 months. So if today’s inflation rate is 8%, that means things today cost 1.08 x the cost of things one year ago.

GICs are forward-looking. So if you buy a one-year GIC today at 4%, in one year, you’ll have 1.04 x the amount you invested.

Inflation is a lagging indicator; GICs are looking forward.
______________________________________

why? did GIC’s give you 8% this time last year? looking forward into the future?

#96 Wrk.dover on 09.12.22 at 11:48 am

Purchase one, two and three year GIC every two months.
Ten percent of net worth in total.

Sleep tight!

Figure out next move as they mature.

#97 Shawn on 09.12.22 at 11:58 am

TD Easyline says I can open a Euro or pound account at my branch (not online) and it sounds a bit clunky. These accounts don’t show up he said on my TD online profile and so I suspect a bit harder to transfer money in and out. But doable. I am going to talk to the branch. Probably not worth it given fees but I will look into it. Also I have no current trip to Europe planned. (Perhaps one of the European blog regulars will invite me for a stay at their villas?)

#98 Faron on 09.12.22 at 12:03 pm

#32 Faron on 09.09.22 at 11:48 am
#173 Faron on 09.08.22 at 11:30 am

#48 Faron on 09.07.22 at 12:35 pm
#39 Sail Away on 09.07.22 at 12:14 pm

Market psychology (put/call ratio, positioning) is dour at this local low, so a small rally seems likely.

1.6% on SPX, 1.2% TSX later… See if Friday brings a VIX crush rally

Another 1.5% on the TSX, 1.3% on SPX. On $1M, that’s $25k to $31k.

And another full pct on the indexes. A $40k+ mistake selling at a pretty clear local low out of emotion (that arose from being leveraged into the market).

Today VIX and SPX correlation is positive. OpEx is this week, SPX and NDQ are overbought and right at the 20 day. Much safer time to sell.

#99 jess on 09.12.22 at 12:19 pm

crypto Minsky moment/

========

…”The conventional view is that a modern market economy is fundamentally stable, in the sense that it is constantly equilibrium-seeking and sustaining, and that some exogenous shock is necessary for some crisis to occur. However, Minsky challenged this perception with the FIH. Essentially, Minsky argues that stability is destabilising, and that the internal dynamics of a system can be solely responsible for market failures. The FIH maintains that the level of profits determines system behaviour, as aggregate demand determines profit, and so aggregate profits equal aggregate investment plus the government deficit. To Minsky, banks act as profit-making institutions, with an incentive to increase lending, which undermines the stability of the economy. Debt plays a crucial role in determining system behaviour, and so Minsky analyses three distinct income-debt relations for economic units.

The three stages of lending which Minsky identifies are the Hedge, Speculative and Ponzi stages. …read more @https://www.tutor2u.net/economics/blog/hyman-minsky-the-financial-instability-hypothesis

#100 Dr V on 09.12.22 at 12:43 pm

73 Damifino

“It’s all about the long term whether you draw funds or not. Dividends and interest still flow. Paper losses are just that, unless you panic and make them real ones.”
———————————————————

Exactly. Ronaldo’s comment surprised me as he has
been around long enough to know how it works.

Also not sure of his comparison to Nov 2020. My Canadian dividend payors well up since then. Also up is the TSX, S&P, N225 and FTSE. My Global divvies up a bit
too. R2000 and NASDAQ roughly the same after this
recent bounce.

Closer on his B&D YTD, but I’m still a bit better as of Aug 31, but my FI component may be lower.

#101 Dr V on 09.12.22 at 12:56 pm

75 Greg

“I know GICs are just another tool banks use to part fools with their savings, but 4% is a better dividend yield than most other asset classes at the moment……
…..when, if ever, should we use dividend yield to guide our investment choices?”
——————————————-

Canadian banks average around a 4% divvy (BNS and CM over 5%) , and they reflect only half or less of their
earnings, receive much better tax treatment, and rise over time. The moderate payout ratio allows them to re-invest or expand operations and increase share price long term.

I think one of the best comments ever was from the poster who says their dividend is now larger than their original investment.

#102 Matt on 09.12.22 at 1:06 pm

Every other post on the personal finance Canada subreddit is about getting horny over “high-interest” savings accounts and GICs. It is really quite depressing.

#103 Lolo on 09.12.22 at 1:31 pm

I use market-linked GIC for my kids since I can’t seem to easily get them an investment account in their name. I put their bday and other gifted money into these when they’ve accumulated enough. I’ve done 2 tranches, one which matures next year. Capped annual rate of return was 8.45, which isn’t bad. Performance to date is just over 6%. Their other tranche matures in 2025, and also running at over 6% annually so far, though this will be capped this to just over 5%. Next tranche though, the cap is over 11%.

#104 Ronaldo on 09.12.22 at 1:52 pm

#73 Damifino on 09.12.22 at 12:40 am
#70 Ronaldo

…but those that depend on their portfolio to produce their monthly income must be feeling quite depressed right now.
——————————-

Not at all. I’ve seen it many times before. My investments have payed my way for the past 15 years (retired at 56). I’ve preserved my original capital and indeed added significantly to it over that time.

It’s all about the long term whether you draw funds or not. Dividends and interest still flow. Paper losses are just that, unless you panic and make them real ones.

Build up an economic engine in your productive years, hire true professionals to keep it finely tuned as you age, then sit back and enjoy more important things.
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I totally understand what you are saying. I retired 22 years ago at 54. Have not had to touch any of my savings since our pensions are more than adequate to cover our annual expenses and then some. I have never bought GIC’s or even had any substantial amount in a savings account. Pretty much fully invested. That is why I can sit back and weather these storms and not like some others my age who rely on their savings and not as savvy when it comes to the markets. And there are many like that and that is why they panic when we have downturns like we have now. I can imagine that Garth and his crew have spent a lot of time trying to calm down some of their clients and prevent them from doing something crazy.

#105 Sarah on 09.12.22 at 2:18 pm

A GIC is a good investment right now if you just want to hold your money. Everything else, including real estate, is too risky. Right now, buying real estate is a dumb idea since the asset is clearly depreciating. Unless you enjoy watching your money evaporate. The variable GIC at CIBC is good. The return will rise as rates go up, and you don’t have to lock it in.

#106 The Guillotine is God on 09.12.22 at 6:36 pm

The 60/40 strategy had its day over forty years of falling cash rates and bond yields. Did well and served its purpose. There will be a new strategy needed for a world of persistent goods inflation, rising rates and yields, falling real estate values, and constrained credit. Not to mention swiftly changing/emergent geopolitical realities. Rising interest rates will challenge fixed income securities, tech stocks, real estate and overleveraged equities….

#107 GIC on 09.13.22 at 1:40 pm

An $8,000 RRSP contribution and a $6,000 TFSA contribution every year for 35 years, 25 to 60 at 4% interest compounded yearly will get you $1,031,113. It will not make you rich but you will retire in poverty either.

#108 Jee on 09.13.22 at 3:18 pm

So a couple does that they will have over $2,000,000, not bad just got to be disciplined enough to do it.