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July 21, 2020 | The Surprise

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.

Have you ever noticed the way media covers financial stuff?

Never fails. When the market loses 2% in a day, it ‘plunges’ as ‘investors stampede the exits.’ This is big news. Pay attention and be terrified. However, when stocks add hundreds of points in a day, the story is buried, and preceded with, ‘Markets moved higher. Here’s Karen with the details, and the weather. Looks like a nice weekend…’

Well, here at GreaterFool we don’t mess with the news. It’s all unvarnished. When the world’s going nose-first into the kitty litter, we report it faithfully. When the tide turns, you get that straight. These days investors should be grinning. Covid may have made a mess of a lot of things, but it also handed over a generational opportunity.

The S&P 500 (the only index you should watch, but not on BNN) is ahead 12% year/year. It’s even up overall in 2020, which is astonishing after a trip into bear market territory in March. In fact since the 23rd of that month, the index is ahead 49%. This year brought the swiftest-ever descent, and the fastest-ever recovery. It you sold when the virus hit, you got a spanking (not the good kind). If you backed up the truck and bought, you’ve made a pile. If you had a B&D portfolio and yawned right through it, Covid’s ended up a dud.

But that’s history. What’s next?


Here’s why.

Stimulus from governments and CBs will to continue. Forever, apparently. The latest evidence came from the EU Tuesday – a package worth about one trillion C$ to finance European recovery. Stocks on that continent have outperformed those in the US for a couple of months now – so I trust your portfolio is global and has exposure there. If not, get some.

Second, a vaccine’s coming. Inevitably. The latest news is one will be approved in Europe in 2020 – and that might be beaten in the US if the Moderna juice continues to look promising. Remember all this is being financed by governments, willing to spend billions on quickly producing hundreds of millions of doses. Even if vaccines are less than miraculous, therapies for Covid are being tested and implemented routinely. The day one of these things is stamped as safe and effective, stand back. Your portfolio will have an eruption.

Third, Trump just wore a mask. He tweeted and used Insta Monday to say this was the “patriotic” thing to do. Amazing. So a river’s been crossed. All the anti-vaxers, socons and F150 AR-15 deplorables just got punked by their grand poohbah. The guy may have done the correct thing, but he’s political toast as a result. He lost the centre long ago. Now he’s ratted on the right. Markets like certainty. They just got it.

Next, look at the retail sales. In Canada they zoomed higher by 19% in May month/month and it looks like June delivered a 25% gain. Car sales soared 66%. Impressive and probably fueled by a heady mix of pent-up demand, deferred mortgage money and CERB cash. If people are dumb enough to live this way, the stock market is happy to profit from their profligacy. Up she goes.

Also coming is a giant new stimulus package in the States, to replace an income support program which is about to expire. Now just a few months from the pivotal election, it’s in nobody’s political interests to make voters suffer. Central banks, for their part, will continue to buy up gobs of assets and keep rates in the ditch. Expect mortgage rates, for example, to be in the 2% range in Canada for the next three years.

Those low rates not only suck and cajole people into fat debts and unearned home ownership, they also fuel stocks. After all, when cash, CICs and bonds pay next to nothing, where else will money go to earn a decent return? If you don’t have enough to retire on in ten or 15 years, there’s little choice but to have equity exposure. GICs are safe, but you’ll have to develop a taste for KD and Canadian wine.

We must face facts. The world is upside down. In a normal recession people lose jobs, deplete their savings, suffer a big income drop and are forced to sell their homes, which decline in value. In this downturn almost nobody’s working, savings are rising, incomes are going up, debt anxieties falling and real estate is plumping. Oh yeah, and the stock market just gained 49%.

More evidence you should never get your investment advice from the media. Or the comment section. Especially that.

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July 21st, 2020

Posted In: The Greater Fool

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