Final Thoughts

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As the world did not apparently end, I thought I might share with you some of the final thoughts I had in the wind and rain while being lashed outside my office window overnight on the 53rd floor of Scotia Plaza.

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Only hours ago was I discovered and cut loose. I could have put up with the humiliation, but not the embarrassment, having widely torn my loin cloth.

(1) There are a few reasons I don’t buy stocks any more. Guess you could say that RIM is one of them, or Apple, Facebook or even the Royal Bank. Good companies founded on innovation which at one time utterly dominate their field can also screw up, disappoint, get inflated and punished. In a world now swamped by high-frequency trading, and algos making millions out of fractional-penny spreads, the little-guy investor doesn’t stand a chance. Investing is all about fighting off volatility.

Day traders are idiots. Professional stock brokers are going deservedly extinct. And don’t get me started on mutual fund salesguys. In 2013 resolve to get some good advice from somebody who sells nothing and has no hot tips.

(2) Lock in your mortgage because 2013 will be the year of change. Will the Bank of Canada up its trendsetting rate? Yeah, probably. Maybe. A quarter point on October 23rd, and another on December 4th. Write that down. Tape it to the fridge. But this is kind of irrelevant, since the bond market will do the job much earlier. Look for a robust year on equity markets and a sustained drop in bond prices as money flows back into the economy.

So, yields will pop. This (not the bank of Canada) is where the banks fund fixed-rate mortgages, which is why you might never again (after about July) see a 3% 5-year rate. Ever.

(3) The fiscal cliff is absolute political theatre, and the US Congress, already mongrels in the eyes most voters, is not about to commit economic suicide. So there will be no deep cuts in government spending or middle-class tax hikes, at least not ones that stick past the deal to be announced after the holidays. That means if your gold or gun stocks recover a little from recent pummeling, you should bail. Buy stuff that actually pays you to own it, and represents the future (greed) instead of the past (fear).

(4) As housing markets across Canada lose momentum, the real estate industry cannot be trusted. Just as the National Association of Realtors told people in the US to jump in during a “market lull” in 2006 – only to get slaughtered in the ensuing six-year crash – so ‘experts’ here will seek to delude, distract, mislead and betray consumers. Like Mark Weisleder, the housing consultant and media columnist this blog finds just so darn amusing.

Writing in the Toronto Star this week about why real estate is a great place to put all your borrowed money he told recent condo suckers the rental vacancy rate in that city is still sub-2%. “This means that for those people who cannot sell their condos, there are plenty of renters who can cover the monthly costs.” That’s right, kids, borrow a down payment from Mom, walk into a giant mortgage, purchase a unit that immediately falls in value, and then find nobody wants to buy it. No probs. Just subsidize a tenant. Who will laugh at you.

(5) The biggest mistake I see people make? When they confuse assets with security. Spoke with a young couple in Vancouver Friday who have saved an impressive $200,000, rent, no debt – doing everything right. But 75% of that is in silver bars lining the bottom of her lingerie drawers. “This scares me,” she said as we got going, but she needed my help to explain to her husband why being a doomer who thinks he knows more than Ben Bernanke is putting them at major risk. Worse, it’s endangering their marriage.

The silver’s stupid, of course – high volatility, no income – but the relationship is what really matters. It could be a junior resource stock, real estate or a fistful of GICs, doesn’t matter. Like the couple I met hours later who got married three years ago, have a kid on the way, but maintain separate chequing accounts because they don’t trust each other. When I asked about it, they looked shocked.

Seriously. It’s just money. Or metal. Or a house. You can replace any of that stuff, or perhaps never needed it in the first place.

But if you find one good friend in life, hopefully a mate or partner, you know wealth.

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avatarGarth Turner - The Greater Fool posted Friday, December 21st, 2012.

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