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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

December 23, 2016 | Spanked

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.

stockings

What’s coming next? Always a big question begging answers when we hit the end of a year. Especially this one. The Trump year.

Luckily I spotted my colleague and ace portfolio manager Ryan in the men’s room. ‘Yo,’ I said, festively, ‘wassup, dude?’

“Well,” he said, unzipping, “this Trump surge has made the markets become overbought and complacent.”

Really? I asked, bending over to polish my Luccheses.

“Yes, with RSI near 70, 74% of stocks in SPX above their 50-day moving averages, and the VIX at 11, all this signals an overbought and exhausted market. Previous readings at these levels have resulted in a small 3-5% pullback over the next month. So we should see a shallow correction starting in January.”

A quick rinse, and he was gone. Porsche keys jingling in his suit pant pocket. I decided to check my new tat, then went off to Google RSI. Of course, this is why it’s cool to have suspender-snapping smart guys around who have more letters after their names than actually in them. How can you not like someone who’s aroused by a chart?

Seriously, Ryan’s right. Since the night of the US election, the S&P 500 has added about 5%, and the Dow’s been propelled to within spitting distance of the historic 20,000 mark. Bond prices have crumbled, bond yields spiked, the US dollar strengthened and consumer confidence soared. It’s all, well, overdone. Especially since equities were expensive even before they were Trumped.

Valuations are stiff – with the price/earnings ratio of the market at about twenty times – but not nosebleed. And as companies make more money in a less-taxed, lightly-regulated America to come, that P/E market should hold firm. We’re figuring this thing has another year, 18 months or even two years to run before a more substantial correction rolls along (think 10-15%). Conclusion – a ‘small pullback’ after the holidays would probably be a good thing for those people who have cash. And courage. And sexy, shapely charts.

THE SUCKER HOUSE

Dozens of people this week rushed to post links on this pathetic blog to a news story detailing how a house in the GTA hinterland sold for $400,000 above asking. It was taken as evidence the market is red hot with no change in sight, even as the economy slips into the dumpster again.

The story, as told, was gripping. “A Vaughan home that sold for $400,000 over the asking price this week drew so many viewers that people lost their shoes at the open houses,” the Toronto Star gushed. “It’s not unusual for homes to sell for tens, sometimes hundreds of thousands of dollars over the listed price in the frenzied Toronto area real estate market. Despite its dated condition, the estate sale property, which sold on Monday for $1.1 million, attracted about 800 visitors over the course of three open houses — and 50 offers ahead of the designated offer presentation time.”

Wow. Eight hundred people tromping through open houses, shoeless, drooling and house lusty. Fifty bully offers. A selling price 57% more than the vendors even wanted! How can this not be a sign from God?

sucker-house

Well, truth be told, houses in that condition (lousy) in an area like that (high demand) at a time when mortgages are where they’re at (record low) fetch about $1 million. The decision by Royal LePage agent Steven Atsaves was deliberate – to list the home  $300,000 below market value (at $699,900) and hope a stampede ensued, followed by a bidding war. That’s just what happened, because Steve knows human nature. He understands people can be easily trapped in a situation in which emotion and competition make them act in ways never intended. “I knew the influx of people coming was going to be insane,” he said. So Stevo may just be the ideal realtor!

The result was as expected. Cars and footwear everywhere. Conversations with prospective buyers limited to two minutes. Deplorables crushing each other in the narrow hallway between tired bedrooms. But it worked.

In the end the sellers, who didn’t lift a finger to prepare for the sale, leaving it all to their agent’s manipulative, morally-questionable, bait-&-switch, ethically-challenged, brilliant marketing plan, scored a sale price of $1.1 million.

We’re doomed.

May your Christmas be merrier for knowing you’re not the nimrod who bought this house. Unless you are.

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December 23rd, 2016

Posted In: The Greater Fool

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