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December 26, 2018 | The Advice

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.

Well, now you know why this blog is so boring. Because this stuff works. Here we go again:

(a) Always have a balanced and diversified portfolio
(b) Never sell into a storm.
(c) Ignore volatility. It’s noise.
(d) Never exit an asset class.
(e) Don’t try to time the market. You can’t.
(f) Ignore those who come here to tell you to (i) go to cash, (ii) buy gold, (iii) buy Bitcoin, (iv) buy GICs or (v) run screaming
(g) Invest in quality ETFs in the correct weightings, rebalance once or twice a year and ignore whatever the hell the Dow is doing.
(h) Never watch BNN. Like, never.

On Wednesday US stock markets (ours was closed – big day tomorrow) had the best rally in a decade. The Dow added over a thousand points as it and the S&P gained 5% in a single session. Oil surged ahead almost 10% in a historic romp. After being pummeled lower by close to 20% over the last two months, and losing 8% in just two sessions, stocks suddenly looked too cheap to pass up. Reality set in. Meanwhile Donald Trump was out of the country, stopped tweeting about financial stuff and – before he left – said he really did have confidence in the Fed.

Nice retreat. Just what markets needed to go with news of galloping retail sales that had companies like Amazon exploding higher. Also dawning on everyone after the Christmas break was the fact there’s no fundamental reason the selling should continue.

After all, look at the numbers.  The US economy is growing by a robust 3.4%. Unemployment is at a 50-year low of just 3.7%. Corporations have been making a ton of money. Central banks have indicated they’ll be throttling back on rate hikes. There are more job openings than applicants to fill them. Inflation is tepid and under control. In short, there is no recession looming. There never was. And so long as these conditions continue, the next one will not come soon.

Never look back: US market adds record 1,000 pts


Problems? Of course. Always got ‘em. Trump’s unpredictability and tactics. Trade wars. Brexit, Macron and Chinese growth. Political polarization and gridlock. Rising rates. And epic debt.

But that’s exactly why a correct portfolio is built as I have suggested. Balance means having 40% of so in safe assets (government, provincial and corporate bonds as well as high-yield debt and preferreds) and the rest in growth (equity-based ETFs with exposure to Canada, the US and international markets, plus REITs). As last week showed, when stocks plop, bonds plump and volatility is lessened.

Diversification means no individual stocks, but exchange-traded funds instead. No mutuals, of course, unless you like being savaged by fees or your BIL sells them (still refuse). Don’t overweight Canada just because you live here. And when you rebalance do the opposite of what your gut tells you – sell off winners that become overweight and buy losers with the profits. Remember – you have no idea what’s coming. Next year Bay Street could roar while Wall Street worries about the 2020 election. Bonds could melt up. Emerging markets surge back. You have no idea, so stick with the plan.

And did I mention never watch BNN?

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December 26th, 2018

Posted In: The Greater Fool

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