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Thread: New approach to the stock market

  1. #1
    grish
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    Default New approach to the stock market

    There is an on-going thread on the value of BP shares. I did not want to take that thread into an unintended path, so I would like to open up a discussion here about the nature of investing and the stock market.

    My understanding is that the way the market operates now is to allow for most liquidity of funds. People ride the waves and throw money into whatever they perceive will earn them the most. These earnings are through market ups and downs, dividends, options, or all of the above.

    But this has become for the most part a game where people look at performance more so than who and what they support. We have on C2E an on-going discussion about LUSH's stance on the status of the oil sands production. But what if your portfolio includes a percentage of LUSH stock and a percentage of any of the players in the oil sands? Do you even know? Does it matter? Would you sell one or the other depending on your opinion of the issue if both stocks provide you with a good return?

    Similar game was playing out with banking and undervalued mortgages. People were advised to invest into equity-heavy funds, while the equity did not hold the promised value.

    The point I am getting to is to what extent is this pure speculation game when people simply trend watch as lines go down–BUY!!! and lines go up–SELL!!!. With such gains on a whim do not produce anything of value in the time that the fluctuation has taken place. And, as they say, historically the markets are going up, all this is doing is creating a parallel form of inflation and not, as claimed by financial experts, staying ahead of it.

    My specific questions are:
    1. Should all investing be more individually measured and company, product, activity-specific?
    to that end
    2. Should all investing be done locally with companies and people you have a personal relationship with and in the market you actually know about?
    3. Has this become too much of a gambling addiction rather than an actual and legitimate business practice?

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    Quote Originally Posted by grish
    1. Should all investing be more individually measured and company, product, activity-specific?
    No. Academically there is very little support for anything other than index investing for the average person, which I will get to later. You don't hear about it because there's virtually zero money to be made by the financial industry with buy and hold index investing.

    2. Should all investing be done locally with companies and people you have a personal relationship with and in the market you actually know about?
    Same as above.

    3. Has this become too much of a gambling addiction rather than an actual and legitimate business practice?
    Absolutely yes. Although I wouldn't say it's a "gambling addiction." The financial industry has grown far too large and for the most part does little or nothing to improve returns for investors. It's a giant shell game. Economic growth is generated by companies investing money, researching and developing new products and finding new markets. Provided the financial system is properly allocating investment funds to businesses, anything more than that is essentially waste. Just listen to any talk by John Bogle or Warren Buffet. The financial industry for the most part is actually a leach on the economy once it gets past a certain size, not a driver of it. In the past 30-40 years the financial industry has grown and grown to become one of the largest parts of the economy, and that's not necessarily a good thing.

    Read more about index investing here: http://www.investopedia.com/university/indexes/

    A very basic, easy to read book about it: http://www.amazon.com/Little-Book-Co.../dp/0470102101

    The summary is that outside of a very few exceptions, most mutual funds and investment advisors don't even perform as well as the basic stock market index over the long term, BEFORE they deduct their fees. So even if they did match the stock market's average performance (which they don't), you'd still be better off index investing as their fees will knock another percentage or two off your returns, whereas low cost index funds typically have MER's well under 0.5%.

    The above is strictly from a "returns" basis. Throwing morality, sustainability etc in to the mix obviously complicates things.

  3. #3

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    Quote Originally Posted by Marcel Petrin View Post
    No. Academically there is very little support for anything other than index investing for the average person, which I will get to later. You don't hear about it because there's virtually zero money to be made by the financial industry with buy and hold index investing.
    .
    Academically there is a split in finance between those who believe in the efficient market hypothesis and those who don't. Most recent evidence suggest that markets are not efficient - this means that they can be consistently beaten. In saying that, it likely isn't easy. Undergraduate texts tend to blindly follow EMH suggesting tools based on it (like the CAPM), that probably aren't that accurate (there is no reliable means to measure beta), but give people some false confidence to make decisions with.

    Some funds do a pretty good job and seem to be able to consistently generate returns above the market index without an excessive risk profile. Index funds are only one option, and provide only one aspect of a portfolio, I think it can make sense to have a bit more of a mix of assets than just one index and just shares.

    As to day trading and similar, I don't see the harm in it as long as people know what they are doing. Markets are important for setting prices, and trading helps to set the market, for better and worse. People speculate on real estate, on shares, on love, its all fair and good until you get hurt, it makes life a bit more interesting.
    Last edited by moahunter; 10-06-2010 at 12:53 PM.

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    Quote Originally Posted by Marcel Petrin View Post
    You don't hear about it because there's virtually zero money to be made by the financial industry with buy and hold index investing.

    The financial industry has grown far too large and for the most part does little or nothing to improve returns for investors. It's a giant shell game. Economic growth is generated by companies investing money, researching and developing new products and finding new markets. Provided the financial system is properly allocating investment funds to businesses, anything more than that is essentially waste. Just listen to any talk by John Bogle or Warren Buffet. The financial industry for the most part is actually a leach on the economy once it gets past a certain size, not a driver of it. In the past 30-40 years the financial industry has grown and grown to become one of the largest parts of the economy, and that's not necessarily a good thing.

    The summary is that outside of a very few exceptions, most mutual funds and investment advisors don't even perform as well as the basic stock market index over the long term, BEFORE they deduct their fees. So even if they did match the stock market's average performance (which they don't), you'd still be better off index investing as their fees will knock another percentage or two off your returns, whereas low cost index funds typically have MER's well under 0.5%.


    Outstanding !

    Top_Dawg really likes your post Marcel.

    Top_Dawg also wants to touch on what was and continues to be the major contributing factor that led to such growth in the financial / insurance industry. It's not talked about very much because some don't find it a very pleasant topic.

    It started in the late 1960s. Up until then universities admitted students who were the brightest, most capable, and who had the greatest chance of success. Academic programs were challenging and rigorous.

    Then there was a huge societal shift. Everybody was entitled to send their kids to university no matter how mediocre and academically unaccomplished they were.

    They funnelled them into Arts, Business, Science, Education faculties, dumbing down all the programs to suit this new breed of abject dumbpuck who was fast becoming the average university attendee.

    Then they graduated all these obtuse morons. And sadly it became evident that there were no jobs for these useless pieces of ****. This was very disconcerting. For students, parents, educators, - hell society at large. After all, they weren't now going to send them into the skilled trades. They had university degrees.

    So where did they end up ?

    In banks, brokerages, insurance companies etc. Producing nothing of value. The industry campaigns mightily convincing everyone that they so desperately need all this paper. And employs all these dummies to sell differing variations of the same paper.

    Top_Dawg thinks it would be really interesting if en massse everybody abandonned mutual funds and all their related nonsense and returned to putting their money exclusively into GICs, savings bonds and real estate.

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    ^actually, most of the "brightest" students in terms of math, physics etc DO go in to financials, and are known as "quants." Typically because the money there is an order of magnitude or two higher than if they stayed in applied sciences or academia.

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    At that level yes.

    Top_Dawg is alluding to the cube farm in all banks, brokerages, insurance companies etc. filled with dolts and bimbettes telling everybody they are ' personal banking specialists ' or the like.

  7. #7

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    If you invest locally you may find that all your eggs are in one basket - your job as well as your savings both riding the local economy up and down. That said, you may be able to develop an expertise in the local enterprises that might give you an advantage.
    Last edited by KC; 13-06-2010 at 10:21 PM. Reason: rewrite

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    Forgot to provide this link earlier: http://www.sanfranmag.com/story/best...oull-never-get

  9. #9

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    There's current news out that is a great lesson in being wary of generalizing anything, any rule of investing. Sadly, equity indexing pretty much beats all other broadly available investment options over time but what happened to the NASDAQ is a great lesson in indexing and averaging into any market. The NASDAQ peaked in 2000 and then dropped. Only now, 15 years later did it hit that prior peak. Anyone that loaded up on a NASDAQ index fund/ETF near the peak hasn't done all that well. Much like buying a home near the 1980 peak in our housing bull market - it took about 15-20 to price at those levels again.

    Thus I figure people in the past invested in equities without much of a realization that the "long term” isn’t just 2 or 3 years, it's potentially closer to 2 decades peak to peak - net of dividends. More people know otherwise today. And since most people start to really invest in their 40s or so after the mortgage is paid off, if a major down cycle occurs when they are 50, 55, 60 - they’d better have reserve funds to handle early retirement spending to avoid selling down their investments at 65 to 75 years if age. (They need pension income, cash or investments that pay dividends or something.) Ideally they could keep buying as the index fell in order to buy low and later sell high.


    March comes in like a lion; Nasdaq roars above 5000
    excerpt:

    "The Nasdaq composite capped its long march back to 5000 on Monday, eclipsing, then closing above the long-hallowed mark for the first time since March 2000"

    http://www.usatoday.com/story/money/...nday/24253319/
    Basically, index funds aren't what they used to be when they appeared in Canada about 25 years ago. (I may be wrong, but believe Canada beat the US by a few years with the first index ETF.) At that time they were based on broad indexes (TSE and S&P) and very likely the DOW 30 but before the end of the 1990s with the tech bubble and all the "irrational exuberance" the product line was being diversified into things more like sector funds. Nasdaq which I think was more of a sector back then could be bought as an index funds or ETF because it was a popular investment at the time. So bottom line is that if people buy index funds in narrow sectors they'd better expect a lot more volatility than in a broad based fund and be prepared to ride out some very long down cycles.

    http://stockcharts.com/freecharts/hi...etindexes.html

    Lastly, positive investment returns reported after shorter periods of time (say 5 - 10 yrs) almost invariably include dividends (aka total return indexes). So people need to be aware that outside of RRSPs, TFSAs taxes are due on reinvested dividends and so those market reported returns are not attainable for many investors. Still, dividends provide cash flow, an insurance of sorts, as well as an opportunity to reinvest in down markets. Some narrow sector indexes don't pay much in dividends so you are left simply riding out the market hoping for it to eventually rise above your average cost.
    Last edited by KC; 03-03-2015 at 09:43 AM.

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    Quote Originally Posted by KC
    Sadly, equity indexing pretty much beats all other broadly available investment options over time but what happened to the NASDAQ is a great lesson in indexing and averaging into any market.
    I don't see how the NASDAQ's dismal returns are a great lesson on indexing investing, other than showing why it's so important to target a broadly diversified index and not attempt to target certain markets, sectors or industries. Anyone heavily investing in only the NASDAQ would be completely ignoring one of the core tenets of index investing.

    Quote Originally Posted by KC
    Thus I figure people in the past invested in equities without much of a realization that the "long term” isn’t just 2 or 3 years, it's potentially closer to 2 decades peak to peak - net of dividends
    The S&P 500 index has only had, I believe, two periods of 10 years where returns were negative: the Great Depression and the Great Recession. If you broaden it to 20 years, then even those huge events aren't enough to wipe out the returns.

    Quote Originally Posted by KC
    (I may be wrong, but believe Canada beat the US by a few years with the first index ETF.)
    Index funds long predate the invention of ETF's. John Bogle created the first index fund in 1976: http://en.wikipedia.org/wiki/The_Vanguard_Group#History

    You don't have to buy ETF's to index invest. There are low cost mutual funds that can do essentially the same thing. Whether ETF's or mutual funds make more sense depends on a variety of factors that differ from one person to another.

  11. #11

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    Investing in the stock market is like buying real estate. You have to be able to hold out for a profit. Nobody can predict how things are going to go. A company could be selling well then all of a sudden there is some unexpected glitch. We all know of companies that were riding high a few years back and are now struggling. If you have money in the stock market you are better off keeping your portfolio as diverse as possible plus be prepared to hold out for good returns. It also helps to read the business section of newspapers to see what is being developed etc. If you find out there is a new drug that shows great promise you could buy shares in the company that makes it. If you find out a company is expanding then buy shares etc. Multi-millionaires/billionaires usually have financial managers for their investments and I should imagine those financial managers will have inside information.
    I have conversed with the worst kind of hectoring, bully pulpit smart-a**e*; dripping with virtuous self-aggrandizing sanctimony.................. and that's just on this forum.

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    The vast, vast majority of financial managers and mutual funds who actively try to trade on the market end up significantly under-performing the overall market, once you account for their fees. If you think that reading the business section of a newspaper is going to give you a leg up on the markets, then you are incredibly naive. There are hundreds of thousands, if not millions, of traders and analysts and advisors that literally spend nearly every waking hour poring over the most obscure data they can find, let alone the business section, just to get a leg up on everyone else. And the vast majority of them fail at doing so over the long term, and at best will get a return close to the overall index. But again, after their clients get charged 1-2% of their assets for the advisor's fee, they're way behind.

    You know how most people in finance make money? By charging fees while managing other people's money. You're better off investing in the mutual fund company's stock, than you are buying their mutual funds. I'm not saying it's impossible to outperform the market, some people do for significant periods of time, but they are few and far between, and the chances of you getting lucky and hitching your wagon to them are fantastically small.

    If you are genuinely curious about index investing, a good site that is specifically for Canadians is here: http://canadiancouchpotato.com/
    Last edited by Marcel Petrin; 03-03-2015 at 06:01 PM.

  13. #13

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    I don't think it's nave reading the business section to find out who is expanding were and who is closing out and who is being taking over. Anyone buying stock has to be prepared to hold out for returns. Very few people buy shares then find them soaring to great heights after they buy them. If it happens they are exceptionally lucky. If a person bought Apple shares for a low price when Apple first started out I should imagine by now they have a tidy profit. If the bulk of a persons shares are in big food companies like Kraft etc. I should imagine they show modest returns. We all have to eat but I doubt the stock on those companies fluctuates much unless they buy someone else out or they invent a new product that everybody wants. Some people make money in stocks while directing their own portfolios but I should imagine if it's the average Joe their investments are very modest.
    I have conversed with the worst kind of hectoring, bully pulpit smart-a**e*; dripping with virtuous self-aggrandizing sanctimony.................. and that's just on this forum.

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    Quote Originally Posted by Gemini
    I don't think it's nave reading the business section to find out who is expanding were and who is closing out and who is being taking over.
    Yes, it is, if you think that's going to give you any sort of advantage when it comes to actively trading stocks. Again, there are countless people out there doing an immense amount of research on any number of industries, companies, sectors, or investment products. Spending half an hour reading the business section isn't going to do you a lick of good when that's your competition.

    If you don't believe me, then believe the best investor in history, Warren Buffett:

    http://www.marketwatch.com/story/war...und-2015-03-02

    The Oracle of Omaha said athletes are often approached with investing ideas tied to restaurants or real estate, but James should buy a low-cost index fund, while also keeping a significant cash reserve — “whatever makes him comfortable.”

    “Just making monthly investments in a low-cost index fund makes a lot of sense,” Buffett said.
    And even the guys spending huge amounts of time and using some of the brightest minds in the world can't beat index funds: http://www.cnbc.com/id/102395788#.

    The Vanguard S&P 500 Admiral index fund Buffett chose is up 63.5 percent since the bet began.

    The five funds of hedge funds Protege picked were up roughly 19.6 percent.
    You know why you've never really heard of this before? Because there's little or no money for financiers to be made in promoting index investing. They'd much rather you give them your money to play with, so you can pay them a couple percent a year while they mostly trail the overall market.
    Last edited by Marcel Petrin; 03-03-2015 at 06:25 PM.

  15. #15

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    ^You're talking about high rollers I'm talking about your average Joe/Jane. I'm talking about investing hundreds/thousands. I'm talking about buying stocks for the long term for modest growth. The high rollers buy millions of stocks and usually take higher risks because they can afford it but I bet even they have stocks that just slowly gain over time. Average Joe will no doubt over time make money it's just holding out until that time. Don't risk more than you can afford to loose.
    I have conversed with the worst kind of hectoring, bully pulpit smart-a**e*; dripping with virtuous self-aggrandizing sanctimony.................. and that's just on this forum.

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    Quote Originally Posted by Gemini View Post
    ^You're talking about high rollers I'm talking about your average Joe/Jane. I'm talking about investing hundreds/thousands. I'm talking about buying stocks for the long term for modest growth. The high rollers buy millions of stocks and usually take higher risks because they can afford it but I bet even they have stocks that just slowly gain over time. Average Joe will no doubt over time make money it's just holding out until that time. Don't risk more than you can afford to loose.
    No, I am absolutely not talking about high rollers. Index investing is applicable to just about any one looking to invest, whether they have thousands or millions. If it's just hundreds, then yeah, you're probably best off just finding the highest interest savings account that doesn't charge any fees. But outside of that, buy and hold index investing works quite well for any net worth. The strategy might change a little, in terms of lower net worth individuals being better off with buying low MER mutual funds as opposed to ETF's, as mutual funds don't have transaction costs like ETF's do, but that's about it.

    You seem to have a fundamental misunderstanding of what index investing is, how it works, and who it works for. If you're truly interested, take 5 minutes and read this FAQ: http://canadiancouchpotato.com/couch-potato-faq/

  17. #17

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    ^I have my limited funds in index funds. Its not as "fun" as going out and buying a portfolio, but its reliable, easy, and a lot lower cost. I think it would be interesting if CPP, AIMCO or similar, simply purchased index's of Canada / US, and some global, it would certainly save a lot of management time (like CPP having to deal with the Laricina default).

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    Quote Originally Posted by moahunter View Post
    ^I have my limited funds in index funds. Its not as "fun" as going out and buying a portfolio, but its reliable, easy, and a lot lower cost. I think it would be interesting if CPP, AIMCO or similar, simply purchased index's of Canada / US, and some global, it would certainly save a lot of management time (like CPP having to deal with the Laricina default).
    A lot of the huge pension and sovereign wealth funds still have management costs that are pretty darn low even though they're actively investing, because of their scale. And they're investing in things that go above and beyond simple equities/indexes. So long as they're not trailing comparable benchmark indexes, I don't think it's a big problem. And the CPP has to be a bit more risk averse than the average investor. Imagine the headlines if the CPP shrunk by 30-40% in 2008. Heads would roll.

    That's the one thing with index investing: not every market participant can do it, or even a significant minority of participants can, because then markets will start to get very inefficient since no one is trying to actively trade and beat the market. Where that line is drawn exactly, I have no idea.

  19. #19

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    Quote Originally Posted by Marcel Petrin View Post
    Quote Originally Posted by moahunter View Post
    ^I have my limited funds in index funds. Its not as "fun" as going out and buying a portfolio, but its reliable, easy, and a lot lower cost. I think it would be interesting if CPP, AIMCO or similar, simply purchased index's of Canada / US, and some global, it would certainly save a lot of management time (like CPP having to deal with the Laricina default).
    A lot of the huge pension and sovereign wealth funds still have management costs that are pretty darn low even though they're actively investing, because of their scale. And they're investing in things that go above and beyond simple equities/indexes. So long as they're not trailing comparable benchmark indexes, I don't think it's a big problem. And the CPP has to be a bit more risk averse than the average investor. Imagine the headlines if the CPP shrunk by 30-40% in 2008. Heads would roll.

    That's the one thing with index investing: not every market participant can do it, or even a significant minority of participants can, because then markets will start to get very inefficient since no one is trying to actively trade and beat the market. Where that line is drawn exactly, I have no idea.
    Pensions and endowments have different, usually current and near term, cash flow requirements and so are more like someone already in retirement in that sense. Moreover, people endlessly look at equity index returns and then without thinking, compare say the TSX return to their pension return and become critical of the pension's performance. Insane, since when would you want you pension fund to put 100% of their funds into equities - even in situations like we've seen lately.

    Unfortunately, pensions make the same mistakes everyone else does - they chase rainbows or drive by the rear view mirror as it's called. Arnold van den Berg described this very suscinctly in an Outstanding Investor Digest article in the 1990s where he talked about how the conservative nature of pensions essentially caused them to load up with gold in the late 1970s at the end of its bull market. Basically, pensions are conservative. They wait for academic proof before moving. That comes fro the academics who need to wait for to quantifiable evidence to study and once they have it, as occurs in a bull market, they start to reason that the outperforming sector is a logical addition to any portfolio. So by the time the justification has arrived and policy benchmarks are adjusted and approved, the rational reasonable justification has long passed. On several occasions Buffett has taken pension management to task as well.
    Last edited by KC; 04-03-2015 at 10:38 AM.

  20. #20

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    Quote Originally Posted by Gemini View Post
    I don't think it's nave reading the business section to find out who is expanding were and who is closing out and who is being taking over. Anyone buying stock has to be prepared to hold out for returns. Very few people buy shares then find them soaring to great heights after they buy them. If it happens they are exceptionally lucky. If a person bought Apple shares for a low price when Apple first started out I should imagine by now they have a tidy profit. If the bulk of a persons shares are in big food companies like Kraft etc. I should imagine they show modest returns. We all have to eat but I doubt the stock on those companies fluctuates much unless they buy someone else out or they invent a new product that everybody wants. Some people make money in stocks while directing their own portfolios but I should imagine if it's the average Joe their investments are very modest.
    Skim this video. One can be determined to match an index and therefor potentially go right off a cliff with everyone else. People need to read and understand what their money is doing and why. They need to understand that riding out most things makes sense and probably will for most of their life, however, that periodically, they need to think for themselves - maybe once, maybe twice in an average lifespan and seek to protect their savings and not try to match an index.


    Robert Shiller Examines Whether We Are Headed Towards Another Financial Crisis
    March 03, 2015

    http://www.gurufocus.com/news/321091...nancial-crisis

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    Market timing is a mug's game. You don't just have to predict a crisis, you have to predict the timing of it. And then you have to predict the timing of the recovery. Many of the doomsday predictors had been doing so for years before the crisis finally hit, and almost none got the timing right. If you'd listened to them and sold in 2006, you'd have missed a huge amount of the run up before the crisis.

  22. #22

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    Quote Originally Posted by Marcel Petrin View Post
    Market timing is a mug's game. You don't just have to predict a crisis, you have to predict the timing of it. And then you have to predict the timing of the recovery. Many of the doomsday predictors had been doing so for years before the crisis finally hit, and almost none got the timing right. If you'd listened to them and sold in 2006, you'd have missed a huge amount of the run up before the crisis.
    That's being a bit too dogmatic. Sometimes its reasonable and rational to step back to protect one's capital when the world seems to be behaving irrationally. In those cases I don't really care if my timing is off and I suffer opportunity cost. I can instead sleep at night.

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    ^When has the world not behaved irrationally?

    Regarding market timing, I agree with Marcel. I was tempted to sell my mutual funds last September before a dip in the market that turned out to be temporary. Glad I didn't since my portfolio has since gone up 15% from September 2014 to today.

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    Most of the time I'd say it's impossible to tell rational from irrational market behaviour. However, if in 1999 I held a NASDAQ index fund I think I would have had a very had time believing that it was valued rationally and that I shouldn't rebalance but instead hold for the long term.

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    No question that depending on the size of your account, you should be rebalancing several times a year as you re-invest dividends, contribute more funds, and so on. But again, holding a fund that tracks the NASDAQ is pretty much the antithesis of index investing. No different than if you were heavily invested in gold, mining, or energy stocks. The whole point of index investing is to be widely diversified, and the NASDAW is anything but. For the most part, a good and simple indexing portfolio for a Canadian really only needs to hold about 3 different funds: a Canadian equity index fund, an international ex-Canada fund, and a bond index fund. Cutting and slicing much more than that makes managing your portfolio more difficult, and also tempts you to try to guess at which funds might outperform etc.

    Although in all honesty, my portfolio is a bit of a mess. When I started it, index ETF's weren't too widely available in Canada, so I've got a mix of iShares ETF's traded on the TSX, and Vanguard ETF's (US, Europe, Pacific, Emerging) traded on the NYSE and denominated in US currency. It's a bit of a disaster to keep things in balance with all the currency conversions etc, but I've got a spreadsheet that does most of it automatically. Going forward I'm likely to just go with some Vanguard ETF's traded on the TSX, but that'll further complicate my spreadsheet. Unfortunately, as I started index investing in earnest in 2009, there's some very large gains on most of the US denominated funds, and selling them would incur some pretty hefty capital gains, so I can't really clean it up.
    Last edited by Marcel Petrin; 06-03-2015 at 09:33 AM.

  26. #26

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    Quote Originally Posted by Marcel Petrin View Post
    No question that depending on the size of your account, you should be rebalancing several times a year as you re-invest dividends, contribute more funds, and so on. But again, holding a fund that tracks the NASDAQ is pretty much the antithesis of index investing. No different than if you were heavily invested in gold, mining, or energy stocks. The whole point of index investing is to be widely diversified, and the NASDAW is anything but. For the most part, a good and simple indexing portfolio for a Canadian really only needs to hold about 3 different funds: a Canadian equity index fund, an international ex-Canada fund, and a bond index fund. Cutting and slicing much more than that makes managing your portfolio more difficult, and also tempts you to try to guess at which funds might outperform etc.

    Although in all honesty, my portfolio is a bit of a mess. When I started it, index ETF's weren't too widely available in Canada, so I've got a mix of iShares ETF's traded on the TSX, and Vanguard ETF's (US, Europe, Pacific, Emerging) traded on the NYSE and denominated in US currency. It's a bit of a disaster to keep things in balance with all the currency conversions etc, but I've got a spreadsheet that does most of it automatically. Going forward I'm likely to just go with some Vanguard ETF's traded on the TSX, but that'll further complicate my spreadsheet. Unfortunately, as I started index investing in earnest in 2009, there's some very large gains on most of the US denominated funds, and selling them would incur some pretty hefty capital gains, so I can't really clean it up.
    Totally agree. People just have to keep in mind that most of the index investing studies have focused on US post-war experience and primarily at the S&P 500.

    The issue of rebalancing is an interesting one because it introduces passive/formulaic market timing to the equation and is no longer a buy and hold scenario. Dollar cost averaging, value cost averaging, etc. make good cases against "market timing" but against "buy and hold". (And as one study once said, you can't book that average cost.)

    Jeremy Grantham has said some interesting things about career risk and fund managers' short term focus that should also be taken into account in such analysis. Transaction costs, high MERs combined with short term minded bosses doing short term performance measurements on their fund managers and short term minded investors quick to bail to sell low and buy to dilute fund gains vs a simple index highlights a broken system (on average) that will never beat indexes - on average.
    Last edited by KC; 06-03-2015 at 10:09 AM.

  27. #27
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    Just remember - put your foreign dividend-paying equities in an RRSP, not a TFSA. Your "tax free" dividends are subject to foreign withholding tax if they are non-canadian. Which really sucks.

  28. #28

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    More on indexing.

    Note: One needs to read the whole blog posting discussion on indexes and not just my teaser quotes.

    Alleghany Annual Report 2014
    March 8, 2015

    "But this paragraph was kind of interesting:

    The S&P 500 is a challenging benchmark because it is not a static population of companies. Losers are kicked out of the index, and vibrant, growing companies are added. It also represents America's leading companies, including a number of companies that dominate their industries. By contrast, the New York Stock Exchange Composite index is more representative of the average company. In 2014, the NYSE Composite returned 6.9%, and has returned about 6.9% a year over the past decade.

    Honestly, I've never really looked at the S&P 500 that way, but ..."


    "McGraw Hill Greatest Fund Manager on the Planet!
    So, wait a second. The S&P 500 index is actively managed (as described above) and everyone has trouble beating them. Doesn't that make the S&P 500 index committee the best portfolio managers around? There is more than $1.25 trillion of assets directly tied to the index. If they are that good and can outperform everyone else, surely they can charge 1.0% management fee. That's $12.5 billion in management fees right there...."

    http://brooklyninvestor.blogspot.ca

  29. #29

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    And more on indexing... Note that he's sounding very much like Warren Buffett.


    The upside of a market decline: Burton Malkiel
    Published: Mar 12, 2015

    excerpts:


    "After a great run in 2013 and a respectable return in 2014, it might seem that stocks are overdue for a down year, if not a collapse. And maybe that will happen.

    But it won't be a bad thing when it happens, if it happens at all, says Burton Malkiel in an NPR interview. "The only people who should pray for higher stock prices are people who are in retirement who are liquidating their portfolios," Malkiel told NPR. "Everybody else should actually be very happy when stock prices go down."

    Malkiel, a Princeton professor and author of A Random Walk Down Wall Street, is a member of the Investment Committee of my firm, Rebalance IRA. Now a classic of the investment genre, the recently updated “Random Walk” truly set the stage for the passive portfolio approach revolutionizing retirement. ..."


    "So what is Malkiel talking about when he says lower stock prices are good? ..."


    "I think that for most people who are saving for retirement, they're going to be investing year after year after year. And so for those people, while everyone prays for higher stock prices, you actually ought to pray for lower stock prices," Malkiel continued. ..."


    http://www.marketwatch.com/story/the...dist=countdown

    "But now for the final exam:

    If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the "hamburgers" they will soon be buying. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices."

    1997 Chairman's Letter

    http://en.wikiquote.org/wiki/Warren_Buffett
    Other sourced Buffett quotes:

    c2e thread: House Prices - due to tumble?

    Quote Originally Posted by KC View Post
    Quote Originally Posted by maclac View Post
    Quote Originally Posted by KC View Post
    ^ the more you pay for oil (as in gas for you car, etc) the less income you have for other things, like RRSP contributions. The more you pay for housing, the less you have for other things, like RRSP contributions.
    Or, one could say that the higher price for oil - the valuation of one's RRSP's - if that person is heavily vested into Energy and Resources - such as myself. I am more willing to pay $1.50/L of gas, knowing full well that my RRSP's are going through the roof. Unfortunately, people get get excited with cheap gas and don't think of the long term effects - such as the ridiculour salaries guys are making on the project that I am part of on the 881.
    In the ideal world: a high salary, and low prices for anything you buy.


    Buffett quotes:


    “If you expect to be a net saver during the next 5 years, should you hope for a higher or lower stock market during that period? Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”


    “To refer to a personal taste of mine, I’m going to buy hamburgers the rest of my life. When hamburgers go down in price, we sing the ‘Hallelujah Chorus’ in the Buffett household. When hamburgers go up in price, we weep. For most people, it’s the same with everything in life they will be buying — except stocks. When stocks go down and you can get more for your money, people don’t like them anymore.”


    “It seems everybody says [the recession] will be short and shallow, but it looks like it’s just the opposite. You know, deleveraging by its nature takes a lot of time, a lot of pain.”


    “What we learn from history is that people don’t learn from history.”

    KC, please stop fooling others with these non-sense quotes from that tax-cheater-in-chief, even if yourself buy it.

    Holy crap man, comparing a consumable product like hamburger to investments where you put your savings for a rainy day or retirement!!!! Why don't you or Buffet go buy some Russian stocks then...it falling like stone.
    http://www.connect2edmonton.ca/forum...reply&p=647179
    Last edited by KC; 12-03-2015 at 03:15 PM.

  30. #30

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    And one of many (actually very few relatively speaking) making the case for independent thought:

    Albert Edwards Happy Not To Be The Only ‘Party-Pooper’
    Society Generale’s Albert Edwards sees a kindred spirit when Ray Dalio compares today’s economy to 1937
    Michael Ide, March 19, 2015

    “While all around are euphoric we are rattling our chains with an increasing sense of imminent doom. I like to think I’m not the only party-pooper,” writes Edwards."
    ...

    "Edwards doesn’t actually have a better alternative, he figures that the damage from QE is already done and the next recession is on its way, whether the Fed starts tightening this June or next year.

    “It is indeed a dilemma but likely already too late to avert another crisis,” he writes."


    http://www.valuewalk.com/2015/03/alb...rds-ray-dalio/

  31. #31

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    In the article below, the pensioners essentially provided free float to the fund managers, where the managers essentially captured all the gains. So this is NY where supposedly the best of the best, the brightest, the most expensive talent is available on all fronts when it comes to managing money. Now if they can't do it very well, how can the average, "average person" investing for their own retirement expect to beat the markets?

    I suppose they could have made a lot more for the pensions than the market averages (and may have over some time spans) but they may also have assumed a lot more risk of negative returns as well (and may have suffered below market returns for some periods as well). This over/under-performance issue would be the same if one owned a subset of the respective benchmarks, so whether its worth the effort and expense and risk needs to be considered. Now, pensions have cash flow requirements that index investing may not align with, however, for a portion of pension assets very long time perspectives are available and so very different risks can be assumed in order to attain market beating returns. If fund fees load upfront costs against that opportunity, it can be drastically diminished. (Like paying annual property taxes on a house that you expect to eventually return a nice capital gain.)


    NYC pension fees are a $2.5B lesson for investors


    "An analysis conducted by the city’s comptroller found that over the last 10 years, New York’s five pension funds have paid $2.5 billion in management fees, almost completely canceling out any above-market gains the funds have earned. The pension funds’ investments in stocks and bonds generated returns that topped expectations by more than $2 billion, according to The New York Times. But the analysis found that fees paid to money managers, combined with the weak performance of other investments, left just $40 million for the pension fund."



    http://www.msn.com/en-us/money/retir...ors/ar-AAaGxge
    Last edited by KC; 10-04-2015 at 09:21 AM.

  32. #32

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    All part of the aging of a country. Seems that over time wealth and power flows to a few and the great masses subsist on what little is available to them.


    Here's the real reason people don't invest in stocks

    "The real problem here is not sloth or inertia but income stagnation — yet another casualty of the tectonic shifts in the economy that have produced a widening gap between the affluent, who can afford to save and invest for retirement, and everyone else, who just can’t."

    http://www.msn.com/en-us/money/topst...cks/ar-AAb2hEe

  33. #33

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    Quote Originally Posted by grish View Post
    The point I am getting to is to what extent is this pure speculation game when people simply trend watch as lines go down–BUY!!! and lines go up–SELL!!!. With such gains on a whim do not produce anything of value in the time that the fluctuation has taken place. And, as they say, historically the markets are going up, all this is doing is creating a parallel form of inflation and not, as claimed by financial experts, staying ahead of it.

    My specific questions are:
    1. Should all investing be more individually measured and company, product, activity-specific?
    to that end
    2. Should all investing be done locally with companies and people you have a personal relationship with and in the market you actually know about?
    3. Has this become too much of a gambling addiction rather than an actual and legitimate business practice?
    On your speculative trend watching comment, I think it's very important for people to be highly suspicious of media assessments of companies and so investing in what you know and understand makes sense. On that, Back in the early 200s I got trading approval from my employer to buy McDonalds shares when they sank to $10 or $11 /sh on word that McDonalds had lost it - and the general market was doing poorly (the opposite of today). All the media was saying McDonalds was a has-been company. (As it is tending to do so again now.) However I could drive by any McDonalds here and see lineups at the drive-through. Looking at the company showed that it was still doing quite well, just not as great as in the past. (Note: I decided to pay off my home renovations instead of buying shares. Had I bought those shares, I could have paid my renos several times over. I'm a serial offender in paying off any debt and thus missing investment opportunities. No regrets there, just observations of my own failures. )

    Anyone watching Canadian Oil Sands over the past few months would have seen numerous Motley Fool articles tossing out all kinds of speculation. The article do provide some factual information but then add in worthless speculation. It's basically, extrapolating the current trend while posing as expert analysis. One of the other article may prove correct but only by luck and not by analytical insight.




    Another recent example I love is IMRIS because of the article below. I'd owned this one on and off for years. I'd bought back in late last year. (Subsequently sold to cover my costs and take some profits on the volatility).

    So when you say: "The point I am getting to is to what extent is this pure speculation game when people simply trend watch as lines go down–BUY!!! and lines go up–SELL!!!. I'd say that behaviour is actually less common compared to what I'd say is more typical of the investment world: People do trend watch and as lines go DOWN-SELL!!! and as lines go UP they-BUY!!!

    So skim this article published in the Globe and Mail and note that IMRIS then sank to new lows - from which it then went on to increase almost 6 fold. (It's now coming down again. Of course the author may eventually prove correct but again only by luck. The charts and trends just reflect lay attitudes much of the time. Investing in what you know and understand such as local companies can give people an edge. Otherwise just buying indexes, maybe adding extra amounts to them when things are looking there worst increases probability of higher longer term returns. Don't you wish you'd bought Edmonton big time in the 1990s when all looked so glum? )





    Imris a prime example of when to cut bait
    LOU SCHIZAS, Special to The Globe and Mail, Oct. 28 2014

    "The research conducted indicates that IM has been selling off for the better part of three years when it traded for just over $8.00. At some point you have to accept what the tape is telling you and stop the losses from consuming your hard-earned capital. A scout of the charts will help identify how best to proceed with this investment."

    "The three-year chart is a textbook example of a stock that makes grown men cry. ... downtrend line and the 50- and 200-day moving averages. ... a death cross that formed in April of 2013 ...."

    "Note the resistance ... the sell signals .... Trading volume ... For a stock trading below $1.00 it doesn’t represent a lot of value."

    "The best possible outcome would be to discuss the advantage of a tax loss sale with your accountant. The idea that a white knight ...What incentive would an acquirer have to be a hero and bail out your losses?"


    http://www.theglobeandmail.com/globe...ticle21351997/
    Last edited by KC; 07-05-2015 at 10:45 AM.

  34. #34

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    I've posted Hussman article links before and for years and years regularly sent friends links to various Hussman weekly articles. (c2e readers have got off easy with just my Buffett quotes ) I see Hussman commentaries as "must reads" but like all such academic research, not necessarily useful in application.


    This is one example, the latest, for a longer-term macro view of equity markets...

    Valuations Not Only Mean-Revert; They Mean-Invert
    John P. Hussman, Ph.D., September 28, 2015

    http://www.hussmanfunds.com/wmc/wmc150928.htm
    Last edited by KC; 28-09-2015 at 12:36 PM.

  35. #35
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    Quote Originally Posted by KC View Post
    I've posted Hussman article links before and for years and years regularly sent friends links to various Hussman weekly articles. (c2e readers have got off easy with just my Buffett quotes ) I see Hussman commentaries as "must reads" but like all such academic research, not necessarily useful in application.


    This is one example, the latest, for a longer-term macro view of equity markets...

    Valuations Not Only Mean-Revert; They Mean-Invert
    John P. Hussman, Ph.D., September 28, 2015

    http://www.hussmanfunds.com/wmc/wmc150928.htm
    his articles may be of interest but the returns he has managed to generate over the past 15 years based on his long term macro view of equity markets don't seem to fully support those views:

    Average Annual Total Returns
    for periods ended
    8/31/15
    1 Year: -5.99%
    3 Year: -6.11%
    5 Year: -7.14%
    10 Year: -2.90%
    Since Inception (07/24/00): 2.82%

    Average Annual Total Returns
    for periods ended
    6/30/15
    1 Year: - 9.99%
    3 Year: -7.85%
    5 Year: -7.61%
    10 Year: -2.93%
    Since Inception (07/24/00): 2.71%

    some of the younger funds report better results but short term results are never as good and most of them present similar results for similar "recent periods". http://www.hussmanfunds.com/theFunds.html

    a look at typical fund content doesn't seem to indicate acual portfolio selections that would be particularly trend setting or surprising or out of the norm per se (i.e. newmont mining, mead johnston, cisco, quest, pepsico, ch robinson, aetna, intel, kohls, medtronic, eli lilly, jack in the box...): http://quicktake.morningstar.com/Fun...bol=0C000023LH
    "If you did not want much, there was plenty." Harper Lee

  36. #36

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    Quote Originally Posted by kcantor View Post
    Quote Originally Posted by KC View Post
    I've posted Hussman article links before and for years and years regularly sent friends links to various Hussman weekly articles. (c2e readers have got off easy with just my Buffett quotes ) I see Hussman commentaries as "must reads" but like all such academic research, not necessarily useful in application.


    This is one example, the latest, for a longer-term macro view of equity markets...

    Valuations Not Only Mean-Revert; They Mean-Invert
    John P. Hussman, Ph.D., September 28, 2015

    http://www.hussmanfunds.com/wmc/wmc150928.htm
    his articles may be of interest but the returns he has managed to generate over the past 15 years based on his long term macro view of equity markets don't seem to fully support those views:

    Average Annual Total Returns
    for periods ended
    8/31/15
    1 Year: -5.99%
    3 Year: -6.11%
    5 Year: -7.14%
    10 Year: -2.90%
    Since Inception (07/24/00): 2.82%

    Average Annual Total Returns
    for periods ended
    6/30/15
    1 Year: - 9.99%
    3 Year: -7.85%
    5 Year: -7.61%
    10 Year: -2.93%
    Since Inception (07/24/00): 2.71%

    some of the younger funds report better results but short term results are never as good and most of them present similar results for similar "recent periods". http://www.hussmanfunds.com/theFunds.html

    a look at typical fund content doesn't seem to indicate acual portfolio selections that would be particularly trend setting or surprising or out of the norm per se (i.e. newmont mining, mead johnston, cisco, quest, pepsico, ch robinson, aetna, intel, kohls, medtronic, eli lilly, jack in the box...): http://quicktake.morningstar.com/Fun...bol=0C000023LH
    Yeah - it's quite amazing. He was an all-star performer but fear of a depression (possibly reflecting a strong sense of fiduciary obligation) drove him to hedging to the point of failure.


    I'm not sure if Morningstar looks back at prior cycle / full cycle returns but here's a comment about one of his fund's earlier performance...


    From the fund inception in July 2000 to Oct. 31, 2008 , his Hussman Strategic Growth Fund averaged 9.9% a year, and has a cumulative gain of 118%, while the S&P500 lost more than 23%. For the 12 months ended Oct. 31, 2008 , his fund lost 0.3%, while the S&P500 lost more than 40%.

    http://www.gurufocus.com/StockBuy.ph...e=John+Hussman
    Like Bruce Berkowitz, Bill Miller a few years ago and Buffett on numerous occasions, sometimes good investors get called has-beens when their performance fails for a few years. It's impossible to judge the value they add without hindsight. Moreover, the cautionary positions are extremely difficult to assess. Somewhat like if you take out insurance on your house and it doesn't burn down, do the losses without payoff make one unintelligent.

    Anyway, the value I see in Hussman is in raising rational precautionary red flags in rising markets and rational green flags in falling markets. (Like someone pointing out a rational opposing position about the expected returns on oil companies when oil prices in say 2007/2008 were pushing 100 - 140/bbl. and some forecasters were doubling their predictions saying $200 was on its way. )
    Last edited by KC; 28-09-2015 at 04:27 PM.

  37. #37

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    Interesting...


    Are Buybacks an Oasis or a Mirage?

    Chris Brightman, CFA, Vitali Kalesnik, Ph.D., and Mark Clements, Ph.D

    Aggregating the equity of all publicly held U.S. corporations, we find [they] issued stock equal to $1.2 trillion in 2014

    http://www.researchaffiliates.com/Pr...Mirage_pdf.pdf

    Last edited by KC; 04-10-2015 at 08:10 AM.

  38. #38

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    Their warnings have persisted for a few years now. This first article is from 2014. So these views are just red flags. People that buy and hold should see the possibility of a market correction as an opportunity. Hussman, Grantham, Icahn, etc. all tend to be big buyers when the markets tumble. They also tend to hedge or lighten up on some stocks to raise cash in anticipation of buying opportunities.



    EVENTUALLY GRAVITY WINS The Burning Platform

    Keep ignoring John Hussman, Robert Shiller, Jeremy Grantham, and all the other data oriented people who honestly assess the stock market and are positive we are in for a big fall. The market is so overvalued at this point that it won’t even need an external event to trigger a crash. Gravity always wins in the end.

    Opinion: Being a stock-market bull just got a lot harder
    By Mark Hulbert
    Published: Sept 9, 2014 6:00 a.m. ET


    The CAPE isn’t a perfect indicator, as Shiller himself will tell you. There are legitimate reasons to question its approach to market valuation. In addition, the bulls have shamelessly come up with myriad other “reasons” not to pay attention to it.

    "...But it is clear that the bulls have a lot more work cut out for them.

    Furthermore, even if the bearish conclusions of these diverse indicators turn out to be right, you should know that they are long-term indicators, telling you very little about the market’s near-term direction. My favorite analogy to describe the situation comes from Ben Inker, co-head of the asset-allocation team at Boston-based money management firm GMO.

    He likens the market to a leaf in a hurricane: “You have no idea where the leaf will be a minute or an hour from now,” he says. “But eventually gravity will win out and it will land on the ground.”


    http://www.theburningplatform.com/20...-gravity-wins/

    Carl Icahn Is Skeptical of the M&A Boom - MoneyBeat - WSJ
    Sept 29, 2015
    "It's financial engineering at its height,” Icahn says.
    http://blogs.wsj.com/moneybeat/2015/.../?mod=newsreel


    Jeremy Grantham Reduces More Than 250 Stakes in Second Quarter - NASDAQ.com
    Aug, 2015
    http://www.nasdaq.com/article/jeremy...arter-cm510879


    Jeremy Grantham: The Man Who Loves Dogs - 1978 Barron's
    http://www.valuewalk.com/2015/07/jer...ons-interview/
    Last edited by KC; 04-10-2015 at 08:57 AM.

  39. #39
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    Of course, a Canadian holding a non - currency hedged US equity fund would have done extremely well in Canadian dollar terms over the past year. I don't have my Quicken data handy, but VTI has been propping up my performance quite nicely over the past year. Will there be a correction or crash at some point? Absolutely. But either one might be years away. Or tomorrow. No one truly knows with any certainty, no matter how much fancy math they do.

  40. #40
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    Went and looked in Quicken at the performance of holdings of VTI (which is a broad market US index fund, not currency hedged) over the last year or so. In Canadian dollar terms, from September 9, 2014 (the date of the quoted article above) until August 14, 2015 VTI's IRR was approximately 32%. That's a pretty spectacular 11 months.

    Unfortunately, it's a bit of a mess to go right up till today using my Quicken data. Up until August my US denominated/traded ETF's were still sitting on the Canadian denominated side of my account, as when I originally bought them 5-6 years ago there wasn't a USD side. I only realized this summer that I could have them journalled over to the USD side without fees, so that distributions aren't getting converted to CDN at a cost of 1.5-2%. Quicken is very touchy with different currencies, and I had to fudge things to get them to work properly. So the past month and a half of returns are a mess and not really comparable. With the recent decline in the US markets partially offset by the declined in the Loonie, it's likely that the actual IRR from Sept 9 2014 to late September 2015 is more like 20-25%, which is still pretty swell.

    The point is, had I read your article when it was published, listened to the advice given, and sold my US index holdings I'd have missed out on what was actually an extremely good year.

    Here's a chart, in USD terms, for VTI over the past year: http://quotes.morningstar.com/chart/...th%22%3A955%7D

    Yes, it's down by 3-4% over the past year, but that's just the unit cost not including distributions. With distributions it would be close to flat. Couple that with the decline in the Loonie vs. USD, the annual return in Canadian dollar terms would be approximately 20% over that time frame, which more or less matches up with what I said above.
    Last edited by Marcel Petrin; 05-10-2015 at 12:01 PM.

  41. #41

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    I too hold a lot of value in US stocks and have done well as the Canadian currency tumbled, but that doesn't mean I believe that the market pricing reflects intrinsically right valuations nor that I believed the Canadian dollar at 95-110c was a long term sustainable exchange rate - hence my (and possibly your) diversification into holdings of non-Canadian positions.
    Last edited by KC; 05-10-2015 at 12:38 PM.

  42. #42

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    Quote Originally Posted by KC View Post
    I too hold a lot of value in US stocks and have done well as the Canadian currency tumbled, but that doesn't mean I believe that the market pricing reflects intrinsically right valuations.
    In other words you are happy to profit from what you consider wrong.

    Don't get me wrong, I can only thank you for your harsh honesty with yourself.

  43. #43

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    Quote Originally Posted by AShetsen View Post
    Quote Originally Posted by KC View Post
    I too hold a lot of value in US stocks and have done well as the Canadian currency tumbled, but that doesn't mean I believe that the market pricing reflects intrinsically right valuations.
    In other words you are happy to profit from what you consider wrong.

    Don't get me wrong, I can only thank you for your harsh honesty with yourself.
    Yes very happy to profit off mispricing, though sad that someone on the other side may be losing. Same for house prices. I don't like the hyping of the idea that young couples should blindly mortgage their futures to get into housing, especially when bubble-like conditions seem to be present, but I am happy to see my own house price go stratospheric, if it makes me - relatively - better off. However, benefitting with my eyes wide open is quite different than benefitting due purely to lucky timing and then suffering unexpected, or worse, inconceivable losses.

    Following academic market valuation risks and then warning others of that such academic measure of risk could eventually materialize seems to be a morally superior position to just encouraging everyone to buy and hold irrespective of their personal situations, risks of job loss, short-term views, potential overallocation to one market sector or another (lack of diversification), etc.
    Last edited by KC; 05-10-2015 at 12:48 PM.

  44. #44

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    I'm curious what people are thinking about equity and bond market values right around now, at current market valuations.

    Considering how domestic energy fortunes have changed in the last year, what have your Edmonton or Albertan friends, family, acquaintances, etc. been saying about their faith or lack if faith in other investment markets.

    Are they buy and holders, can they withstand a significant change (ie a collapse) in their portfolio values, if they are feeling defensive or opportunistic or what these days???

  45. #45

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    The Wall Street Journal, Jan. 21, 2016
    Activists Beware: Huge Investors Debut New Long-Term Index

    Six large institutional investors said they would allocate $2 billion to track a newly created index of shares of companies that focus on long-term strategies.

    The S&P Long-Term Value Creation Global Index comprises 246 companies that meet criteria for return-on-equity, leverage and other financial factors, as well as a score for corporate governance.

    “We are trying to use the index to change corporate behavior,” said Mark Wiseman, chief executive of the Canada Pension Plan Investment Board, in an interview at the World Economic Forum here. Mr. Wiseman said financial markets are too focused on short-term results.

    Mr. Wiseman said CPPIB would invest slightly under $1 billion in the companies in the index. The five other institutions participating in the index’s launch are Singapore fund GIC, Danish pension plan ATP, Dutch pension plan PGGM, the New Zealand Superannuation Fund and the Ontario Teachers’ Pension Plan.

    He said he hoped retail products would also be developed so that individual investors can track the index. CPPIB, which manages C$273 billion ($188.23 billion), will move funds from its passive stock-market investments to the new index.

    Mr. Wiseman also said CPPIB has been “extremely busy” amid the market turmoil of the past several weeks, saying battered asset prices are providing opportunities.

    “Up until the last year, it was very hard to find value in the market,” he said.

  46. #46

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    ETFs like MOAT and dividend achievers already somewhat reflect some of that sentiment. Also there are several conglomerates that provide diversification and also think and act long term and ignore demands for quarterly forecasts.

  47. #47

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    Think long term...


    Oaktree's Howard Marks Says Donald Trump Scaring Investors - Bloomberg Business

    “They’re scaring the hell out of people,”


    http://www.bloomberg.com/news/articl...ring-investors


    This $9 Billion Fund Manager Says He's Sticking With Cash - Bloomberg Business


    The issue, as Douglass sees it, is valuations. If the economy recovers and the Federal Reserve gradually raises interest rates, some of the best-loved stocks are going to look overpriced. Once they fall he’ll start buying again, he said.

    Expensive Shares

    High-quality shares “are still at very expensive levels, effectively factoring in a zero interest rate world virtually forever,” he said. “We’re holding cash rather than the most defensive equities we would have otherwise held.”
    ...

    http://www.bloomberg.com/news/articl...-happy-in-cash
    Last edited by KC; 18-02-2016 at 10:04 PM.

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    I've been linking to Hussman's bearish articles for a few years now. This one is worth reading.

    I can't quote from him, but I can re-quote one he is using: "Buy not on optimism, but on arithmetic."-Benjamin Graham


    Bearishness Is Strictly For Informed Optimists

    http://www.hussmanfunds.com/wmc/wmc160314.htm

  49. #49

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    I suppose each generation bring their own favorite style to investing too. Here is for your Friday Afternoon/weekend reading pleasure: YOLO investing style:

    Market Watch, 5-Apr.-2016
    There’s a loud corner of Reddit where millennials look to get rich or die tryin’

  50. #50

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    Quote Originally Posted by FamilyMan View Post
    I suppose each generation bring their own favorite style to investing too. Here is for your Friday Afternoon/weekend reading pleasure: YOLO investing style:

    Market Watch, 5-Apr.-2016
    There’s a loud corner of Reddit where millennials look to get rich or die tryin’
    Pity. I understood at an early age that a dollar lost at an early age is far, far worse than a dollar lost in old age. Figuratively, losses compound for the rest of one's lifespan, and beyond.

    Unfortunately, the internet aggregates the outliers and makes them seem normal. So these bets will mostly loose but the followers, like followers of value investing gurus, growth investing gurus, etc, all feel that they can perform like the lucky few superstars.

  51. #51

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    well, not everyone is as smart as you. This is also a symptom of bigger societal problems. When even six-figure-salaries can't afford to live the American dream. When smartphones have reduced attention spans to seconds and no one really reads a book anymore. The age of instant gratifications and reality TVs. The inequality and so on.

    But, hey, take it easy. This was meant to be a fun read. Just look how much fun Mark Zuckerberg has Enjoy!



    Source

  52. #52

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    What I know and what I practice are two different things.

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    Sensible article but I think he's wrong on the age thing. Older people tend to be far, far less reactionary over "the latest threat" being promoted. It's due to something called "wisdom" that occurs with age.

    However, there's nothing wrong with being conservative. The idea that you're a loser if you aren't getting S&P500 or better returns is nonsense. One, markets can and do go down and can go down for extended periods of time. Older people that have held off on a balanced investing approach to capture higher probably equity returns should be concerned that equities could drop. At age 70 or so one's remaining savings have to sustain no matter what happens in equity and bond markets and the reality that short-term equity losses are highly likely to revert over any 10 year period is nonsense in terms of their own remaining time, longevity, etc. In other words, if they are overexposed and know it, and know that they may be on thin ice if markets drop, they may be right to feel edgy and any sense of panic may be justified. They just need to avoid knee jerk subjective, manic-depressive responses.


    Beware the Pessimists!
    John Rekenthaler
    24 Feb 2017


    Second, fear plays to the elderly. The young respond to hope and greed—day trading, pyramid schemes, double-your-money offers. (Those were my father’s idea of “investing.”) The way to separate them from their money is to convince them that life is surprisingly easy. There are shortcuts that others just haven’t figured out. It’s the opposite with the old. They are all too willing to believe that the world is degrading. Tell them that their fears are correct. The cataclysm really is coming.

    The third is politics. I’ve written before how right-wing talk radio hosts impoverished their listeners by persuading them to sell stocks during Barack Obama's presidency, because the Democrats would bring financial ruin. Uh-huh. My acquaintance has the opposite problem: She dreads the “Trumpocalypse.” Different party, same diagnosis.

    Most of you, I realize, need no prompts to ignore the prophets. After all, you are reading this article, not that one. For such readers, treat this column as a friendly reminder to stay on the straight and narrow path. And consider the possibility of sending it to friends of a certain age who are feeling insecure about the financial markets, and might be prone to being sold a scare package. If this article helps to prevent such an action, it will be among my more useful deeds.

    http://beta.morningstar.com/articles...essimists.html
    Last edited by KC; 27-02-2017 at 11:35 AM.

  54. #54

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    Family warns about online investment scam after businessman’s suicide | Edmonton Journal

    http://edmontonjournal.com/news/loca...ommits-suicide

  55. #55

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    BlackRock Warns It Would Be ‘Folly’ to Ignore Home Capital Woes
    by Maciej Onoszko
    May 3, 2017

    excerpt:

    "The focus now is on the potential for a systemic issue across the economy and it would be folly just to ignore that," Basdeo said.

    The Canadian dollar has fallen 2.5 percent over the past month, the worst performance among Group of 10 currencies. It was little changed at C$1.3708 per U.S. dollar as of 2:18 p.m. in Toronto, after sliding to the weakest since February 2016 on Tuesday.



    https://www.bloomberg.com/news/artic...e-capital-woes

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    "But having said that, I must admit to having detracted from my usefulness as an investor by assuming that investors overall would at least respond sensibly most of the time to the data they are given. And they do not. " Jeremy Grantham

    Grantham: Why Are Stock Market Prices So High? - Barron's

    "For the record, if you need yet another rebuttal of the Lucas/Fama and French model of economic efficiency on the part of investors, this model is it: a long-term testimonial, and a very stable one, to investor behavior that they would have to describe as inefficient by their definition. And though this investor behavior may be loosely described as rational, it is certainly economically and financially innumerate. I am happy to say that I never believed a word of their theory on the efficiency of the market, which I have always thought is better described as a behavioral jungle. But having said that, I must admit to having detracted from my usefulness as an investor by assuming that investors overall would at least respond sensibly most of the time to the data they are given. And they do not. The effectiveness and persistency of our behavioral model, almost all the components of which should not work in a resolutely sensible world, let alone an efficient one, should have persuaded me to change my thinking years ago. But, here I am, trying to explain during these last nine months or so why the general discount rate of assets has dropped by roughly two percentage points from the 1900 to 1997 average. ..."

    ...They felt this way from 1925 to 1997 and they felt exactly the same way in our new era of 1997 to 2017. So, behaviorally it is absolutely not a new era. It is precisely – to a 0.90 correlation – the same ole same ole. The peaks of 1929 and 1965 delivered favorable margins and inflation inputs but for a very short while in both cases. In contrast, the period of 1997 to 2017 has delivered to investors their preferred conditions almost the entire time, with only two very quick time-outs for market breaks. Can the market really be this easy to explain? Well, it has been for 92 years! And what can we investors do with this information? It tells us..."



    http://www.barrons.com/articles/gran...igh-1501794059


    Bolding was mine
    Last edited by KC; 08-08-2017 at 05:16 PM.

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    Three Delusions: Paper Wealth, a Booming Economy, and Bitcoin - Hussman Funds

    https://www.hussmanfunds.com/comment/mmc171218/

  58. #58

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