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March 11, 2019 | The Journey

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.

One credo of this blog, hotly disputed by the equity cowboys who storm it, is that you should eschew stocks. Yup, no individual companies in the average portfolio. Too much risk, danger and volatility.

And here is today’s example, bred of the weekend tragedy in Africa.

As trading opened in New York Monday morning the Dow briefly shed about 200 points based on one industry – airlines – and a single company. Shares in Boeing (the market’s most heavily-weighted stock)  tanked in pre-opening more than 12% on news its hot new airplane, the 737 Max, had fallen from the sky. Twice in recent months. Eerily similar events. And brand new planes aren’t supposed to do that.

Boeing has more than 5,000 orders for this machine, of which only 350 have been delivered (more than 10% of those deliveries were to Air Canada and Westjet). Now every hour or two another airline announces it has decided to ground its fleet. This could be a corporate disaster. The 737 is the best-selling plane. Ever. And the Max 8 version is supposed to be better – new engines swallowing 14% less fuel. Just what airlines want. So the orders poured in. A third of them going to China – where the planes are sitting on the tarmac.

But this is not an aviation blog. No idea if the twin crashes were unrelated flukes, or if this airliner’s corrupted. The point is Boeing investors were whacked as they slept Sunday might, and the company was stressed. Do you really want that kind of volatility in your portfolio?

By the way, when the market opened Monday Boeing was off 11.3%. An ETF holding the broader US market was up 0.5%. When the day was done the stock had shed 5% while the fund gained 1.5%. See what I mean? Don’t be a cowboy.


And what of the economic prospects going forward? US job numbers last Friday shocked a lot of people , falling off a cliff (even though wages saw a big hike). The US-Kim summit was a total flub. Trade talks with China seemed to have stalled. Government deficits in Canada and the States are pitiful. Central banks are now backing off on monetary policy because of an accelerating global slowdown. After all, Beijing just reported the lowest growth forecast in three decades.

Meanwhile stock markets have charged out of the gate in 2019, posting double-digit returns over the course of less than three months. What should an investor do? Buy more? Retreat? Sell into strength? Buy into a dip?

Answer: for most people, do nothing. If you have the proper balance, diversification and correct weightings (spelled out here a few days ago), sit tight and binge Netflix, not the market. But if you can’t do that and check Dow futures on your phone under the covers, here’s some advice from US brokers Pennock:

Our base-case scenario calls for a correction of 1–3 months in duration, but without a re-test of the December lows. The depth of the pullback will be a function of any growth scare and the details of the U.S.-China trade agreement. We have written before that we are both bullish and bearish on different time frames, and current circumstances suggest different positioning for traders and investors. Traders with time horizons of up to three months should be tilted bearishly, and be prepared to sell or short into market strength. On the other hand, longer-term oriented investors should view any market weakness as an opportunity to deploy funds into equities in anticipation of higher prices later in the year.

There ya go. Ignore the noise, as you were asked to do here last Christmas when the world was ending.


On an entirely different note, here’s a tough email from Carol in Oakville:

“Garth, I know you care about animals and I have a question that must be answered now. I have just been told I am dying of pancreatic cancer with just a few months left (yes, like Alex Trebek, but not so brave or hopeful). My golden, Kelsey, will outlive me by many years and I am sick with sorry about what will happen to her, as I am single and have no children. Cannot bear the thought of her going to the pound and being alone in a cage, maybe being put down. Can you help me?”

Awful news, Carol. We all die, but few are ready. So sorry your time is being cut short. You’re kind to think of Kelsey, and there are some options. One of my corporate colleagues, Janet Mason, has recently written about a few. First, remember that leaving money to Kelsey is a non-starter since the law considers her property. So a human element is required.

The best choice would be to find a guardian, appoint that person in your will then leave money in the form of a legacy to care for the pooch. If this is a friend or neighbour, how about having Kelsey stay over for a number of days and nights soon to make sure things go smoothly, and she gets familiar with a second/new home?

You could leave your executor with the job of deciding how much money should be dispensed to the guardian for the dog’s lifetime care. “You may also choose to discuss including provisions in your Continuing/Enduring Power of Attorney for Property about your pet,” Janet adds, “such as appointing a guardian and permitting reimbursement for pet care and related costs.” Additionally, there’s the option of setting up a non-charitable trust, or of contacting the local Humane Society or SPCA to see if they will care for Kelsey until a home home is found. Perhaps you could start that process now – although I’m sure you will need her touch until the end.

A wise man once said: “If there are no dogs in Heaven, then when I die I want to go where they went.” Me, too.

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March 11th, 2019

Posted In: The Greater Fool

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