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ALWAYS CONSULT YOUR INVESTMENT PROFESSIONAL BEFORE MAKING ANY INVESTMENT DECISION

September 3, 2019 | Get a Grip

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.

Yesterday’s riveting blog was called ‘Fear of FOMO.’ Yup, fear of a fear. In this case it’s how policymakers (like the dudes at the Bank of Canada) are afraid buyers scared of rising real estate will panic-buy if they drop rates. But drop they must. Because of other fears.

In fact having one’s drawers in a twist seems perfectly normal lately. The headlines, after all, are relentless. New tariffs just escalated the China-US trade war. Boris just lost his majority in the UK Parliament and an election and/or hard Brexit lie ahead. The Hong Kong rebellion grows darker, temping Beijing to wave its iron fist. Brazil, Argentine, Venezuela – yikes, all a messy mixture of crazy nationalists and crazier socialists. And Dorian has the climate change gang warning extreme (and very expensive) weather is in our future.

So, fear. Stock markets have see-sawed hundreds of points a session far more often than usual. Bond yields have plopped and bond prices soared. Trillions in global government debt is paying nothing. Oil has dropped and gold jumped. Media’s been pumping the ‘inverted yield curve’ as if it were ebola. What an exaggeration. It’s created a fear bubble.

“All bubbles begin with a good reason,” a report this week from Pennock Idea Hub says, “they just eventually get out of hand. From a global perspective, the rush toward safety began with China’s deleveraging program, whose deflationary effects were exacerbated by the Sino-American trade war, and the effects washed upon the shores of other countries.”

Without a doubt, Trump’s one-man trade war has gone global, and rattled everybody. He will long be remembered as Tariff Man. But (a) the guy’s not an idiot and the odds of him trying to fix the problem are high and (b) it takes a lot more than this to bring in a US recession and create a bear market for investors. (The definition of a bear market, by the way, is a 20% decline that lasts at least a few months, with the average being 14.)

No recession? Then no bear market. And no recession’s on the horizon. US consumer confidence and spending are at high levels. Corporate profits are stable after a period of huge growth. Unemployment’s at a 50-year low. The Fed has already started buying insurance against a downturn, with a rate cut. More to come. There’s a US presidential election in a year, and you can be certain of (a) cheaper money, (b) more fiscal stimulus – maybe a tax cut and (c) endless market-pumping Tweets.

“Our analysis indicates that the Fever of Fear has not broken,” says Pennock, “it pays to be defensive for the next few months. However, defensive sectors are already the leadership, and their prices have already been bid up, as evidenced by the outperformance of the low volatility factor.” And this is why a low-vol, equity-based ETF is great to have in your portfolio, plus that bond exposure I’ve spent the last eight years encouraging you to maintain. These are the times when investors with balanced and diversified portfolios – 40% safe stuff, 60% growth assets, including REITs and Canada/US/offshore exposure – can ignore the Cat 5 howls outside.

Remember – never sell into a storm. Never make investment decisions based on media headlines, since you’ll be the last to know. Don’t sell losers and buy winners – it’s the other way ’round. Forget trying to time Mr. Market. You can’t. That’s exactly why establishing the correct portfolio weightings, and sticking to them, will dampen losses and collect gains.

If you get too emotional, watch The View. That should do it.

     

Sadly, the following message must be delivered.

This blog is about money, the economy, canines, investing, real estate, chiseled abs and occasionally brake repairs and shorter people. It’s not here so you have yet another place on the Internet to dis the Chinese and Asians, tell us how brown families are making houses unaffordable, trash Muslims or opine for those great old days before we had ‘mass immigration.’

It’s a lamentable that populist, nationalist politicians like Max Bernier or you-know-who in the White House can be openly xenophobic and intolerant. They have lowered not only our threshold for dignity and respect but enabled all the economic and social losers among us. Bigotry and prejudice are usually born out of resentment and missed opportunity, which leads to hate and the heaping of blame upon outsiders. History is littered with ‘strong’ leaders who fired up the masses by making others into scapegoats. We are closer to that path than I’ve ever seen in my lifetime.

So, no, I can’t change the course of events. Or make you peaceful, calm and confident. But I can, and will, keep this blog out of the swill. The Delete cops are standing by. The water cannons are loaded. The end is nigh.

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September 3rd, 2019

Posted In: The Greater Fool

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