- the source for market opinions


September 4, 2015 | Lessons

A best-selling Canadian author of 14 books on economic trends, real estate, the financial crisis, personal finance strategies, taxation and politics. Nationally-known speaker and lecturer on macroeconomics, the housing market and investment techniques. He is a licensed Investment Advisor with a fee-based, no-commission Toronto-based practice serving clients across Canada.

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A hallmark of the young, the unschooled, the inexperienced and serial drama queens is that they think nobody’s ever lived through this stuff before. In fact social unrest, regional wars, stock market corrections, wealth disparity, lameass politicians, recessions and not being able to find a job when you need one has all happened in the past. It may just not have occurred when you noticed. Or cared. Or were alive.

So no wonder Jen’s letter this week elicited so much response – from her young cohorts supporting the angst to the get-over-it Boomers who outgrew the same sentiments. Yes, the economy is weak, yup, financial markets have been all over the map and, of course, life is stupid expensive and not enough people are hiring. But in no way does this necessarily frame the future, or mean any of it’s permanent.

Recency bias is a bitch. This makes people think what’s happening now, or has taken place up to this moment, determines what is to come. We wallow in it every day on this pathetic blog. It has most people thinking interest rates can never rise or real estate values can never fall. Similarly, lack of experience leads the ingenues to believe any reversal now foretells disaster ahead. So every stock market dip, for example, means investments are going to zero. Every skirmish will lead to war. Every drought is the end of food.

In short, we live in a time when extreme thought is fashionable. That’s why lots of Millennials swear no generation has every faced their challenges. It actually builds the growing foundation of support for socialism among those who believe the current system has failed – since never before have there been such economic, social or environmental issues.

It’s ironic recency bias and extremism seem to breed so well in a generation better educated than any which came before, or has grown up with Google’s omniscience. You’d think people would know far worse extremes were confronted, and overcome, in the past. Like the Dirty Thirties, the Holocaust or Lake Erie catching fire. Did I mention two world wars, Korea, Nam or Nine Eleven?

Anyway, each generation’s entitled to feeling screwed because compared to their parents, most young people are poor and struggling. They also lean left. When I was in university I joined the extremist Waffle wing of the NDP because I bought into ‘buying Canada back’ from the evil Americans. Mel Hurtig was a big deal, until I learned how he milked government publishing grants for personal gain. My education took a big leap forward when, at 22, Dorothy and I started a company and hired eight people after selling every asset we owned. Employees got paid weekly. We ate KD. It was great.

Now, don’t take this as some old guy’s rant about having to walk miles to and from school, uphill in both directions. Kids today graduating into a world of million-dollar houses, ubiquitous debt and the seventh year of a global downturn have no picnic. Especially with the delayed adulthood and inflated expectations that too much schooling caused. But these are not the end times. Markets are not crashing. Banks are not failing. The system is not broken. Hell, it’s not even a real recession.

What has been said here for a long time is worth remembering. Repeat after me:

People who seek out balanced lives will do fine.

The days of lucking out with a one-asset investment strategy are over.

Demographics are negative for real estate.

The cost of money will inexorably and steadily rise.

Nobody wins when corporations are taxed too much or successful people punished for it.

Never bet against America.

Never borrow what you cannot repay.

Curb house lust.

Be beholden to nobody, even the Bank of Mom.

Remember you can earn, borrow or steal money, but you’ll never regain a single hour.

And, of course, never admit you’re wrong. Or dis a kid.

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September 4th, 2015

Posted In: The Greater Fool

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