The Coming Crash?

[Bonam]

I am an individual stock picker and I have always outperformed the market. The problem with buying a broad ETF, as one analyst once said is that it contains all the companies, good or bad, and I prefer to own only the good. There are always companies clearly superior to those around them. Own those.

For how many years have you consistently outperformed the market? Are you a billionaire? Because if you've consistently outperformed the market for a timescale long enough to have statistical significance, you should be. I should be reading about Argus's words of wisdom right alongside those of Warren Buffet in all those random investing articles that get posted online.

[bush_cheney2004]

moved

Edited August 27, 2015 by bush_cheney2004

[Argus]

Of course you do!

I'm also an anonymous forum user and I get returns better than Buffett!

It honestly isn't hard to keep an eye on what's being recommended on BNN and in the financial papers, keep a watch list, and then select noted names which follow some basic rules.

Where the big funds miss is that they're big. Because they're big they can't invest in any but the largest companies - which tend to be the slowest growers in most cases. They're also not very flexible. They will buy and hold a stock for a long period of time no matter how it's doing.The broad based index funds hold stocks in every sector, even sectors that suck, and have sucked for a long time, and will suck for a long time, like energy and materials. I hold zero energy or energy related stocks, zero mining and commodity stocks, and no Canadian bank stocks. I'm much more of a momentum player, or 'the trend is your friend' as they say.

I was up about 15% on the year going into August. Although I have to admit the big correction hammered me. I lost all the money I'd made over the previous seven months. I've made about one third back, but I expect it will take quite a while to get back to where I was.

The one fund I would invest in is Jason Donville's Capital Ideas, if I was able to. But they're closed, not accepting any new investors. They want to stay small enough they can keep investing in smaller growth funds, and they easily outperform the market every year. I try to invest in whatever they're invested in most of the time.

[Argus]

For how many years have you consistently outperformed the market? Are you a billionaire? Because if you've consistently outperformed the market for a timescale long enough to have statistical significance, you should be. I should be reading about Argus's words of wisdom right alongside those of Warren Buffet in all those random investing articles that get posted online.

I haven't had that much money for long. So that would be, uhm, say four to five years. On the other hand I'm not some nifty professional wearing a five thousand dollar suit. I just listen to certain people who do. LOL.

My words of wisdom? Buy Constellation Software, Alimentation Couche-Tard, Brookfield Asset Management, and Concordia Healthcare.

Edited August 28, 2015 by Argus

[Derek 2.0]

My words of wisdom? Buy Constellation Software, Alimentation Couche-Tard, Brookfield Asset Management, and Concordia Healthcare.

Why would you buy Brookfield? They're under investigation by the SEC and the Brazilian Government........

Funny enough, and I'm sure unrelated to the above, a goodly percentage of Justin's speaking engagements were held at Brookfield properties.......furthermore Brookfield had a business relationship with Heenan Blaikie, the now defunct law firm that PET and Chretien joined after leaving their PM gigs........even more so, on Brookfield's Board sits Frank McKenna, the former Ambassador to the United States under PM PM.......And you called me a Liberal?

I'd think I'd hold off on buying BAM until after they fend off the bribery charges (As I'm sure they will).......

[msj]

I found this interesting despite the source: http://www.cnbc.com/2015/08/27/the-inspiring-story-of-the-worst-market-timer-ever.html

Basically, a fictional dude who invests some cash in 1973, 1987, 2000, and 2007.

That is, before the big market crashes.

But he doesn't sell. He buys and holds but then refuses to invest more cash until right before the next crash.

End result?

Of the $184,000 he puts in, it turns into $1.16 million for a 9% average return per year.

Time in the market is important and more important than timing the market.

[sharkman]

Not everyone has the luxury of that kind of time though.

[msj]

Not everyone has the luxury of that kind of time though.

Sure, as a cancer survivor I know that. Some of us almost die young.

[WIP]

I think a collapse in Canada's housing/lending bubbles is more likely.

Yes, the US has not learned any lesson from the GFC - how could they with no bankers going to jail, no shareholders/bondholders losing their shirts (well, maybe some dumb ones holding Lehman Brothers but that's it).

But Canada hasn't gone through any of that and we carry on, thanks to the commodity boom that China kept going, as if real estate only goes up and, therefore, borrowing more against a rising asset at absurdly low rates is of no risk and no consequence.

If unemployment in Canada hits 10-11% then lets have a discussion about cracks and flaws in the system for which there are plenty.

The Conservatives and their executive class supporters are anxious to paint a smiley face on the Canadian economy now because they know as well as we do that it's not going to last past October! Our economy as designed by Harper, is geared towards selling bitumen and raw materials to a growing Chinese industrial economy.....what now?

Not only are we going to get hammered by the commodity bust, but I haven't noticed anything recently about west coast real estate! There have been a number of articles in recent years pointing to Chinese and Indian investors as part of the increasing housing costs in Vancouver and Calgary. So, if their economies are stagnating, where is that money going to go? Likely not in Canadian real estate, and it will be another bubble that goes bust....but at least is affordable again for many people who follow that quaint old custom of buying houses to live in, rather than to invest in!

[Bonam]

The Conservatives and their executive class supporters are anxious to paint a smiley face on the Canadian economy now because they know as well as we do that it's not going to last past October! Our economy as designed by Harper, is geared towards selling bitumen and raw materials to a growing Chinese industrial economy.....what now?

Not only are we going to get hammered by the commodity bust, but I haven't noticed anything recently about west coast real estate! There have been a number of articles in recent years pointing to Chinese and Indian investors as part of the increasing housing costs in Vancouver and Calgary. So, if their economies are stagnating, where is that money going to go? Likely not in Canadian real estate, and it will be another bubble that goes bust....but at least is affordable again for many people who follow that quaint old custom of buying houses to live in, rather than to invest in!

I'd love to see the Vancouver housing price bubble finally pop. Not holding my breath for it, though.

[msj]

I'd love to see the Vancouver housing price bubble finally pop. Not holding my breath for it, though.

My preference is for a slow unwinding.

Something like real wage growth of, say, 2% per year and a flat real estate market.

Do this for 15 years and that would raise real incomes by about 35% which would make the housing market more reasonable on an income basis.

That would mean homes would be selling at ~7.5 times income rather than the current 10+ times income so still crazy.

[Bonam]

Well except that a 15 year wind down towards more reasonable real estate prices puts the end result too late for the current generation of people that would like to live (and buy their residence) in Vancouver. I'd like to see 5-10% real decline in real estate prices in Vancouver per year, for the next 5 years or so.

Of course, it'll never happen, but one can dream...

[TimG]

I'd like to see 5-10% real decline in real estate prices in Vancouver per year, for the next 5 years or so.

In 1987 real estate prices dropped by 30%-40% in Toronto. The same kind of drop would put Vancouver real estate into sustainable territory and (hopefully) chase away the foreign money that is inflating the market.

[Moonlight Graham]

Bonam and msj, thanks for the explanations and advice. I've started to do more reading on investments, been reading a book on Buffett's investment philosophies. Seems you need a significant amount of time to do the proper research on companies in order to beat the market like Buffett has, so I'm likely going to heed his advice for the laymans and get myself into some ETF's after I've done researching them. Bonam, your point about Canadian dollar exchange on S&P ETF's is something I'll need to look into, thanks for pointing that out.

[msj]

Bonam and msj, thanks for the explanations and advice. I've started to do more reading on investments, been reading a book on Buffett's investment philosophies.

Yes, remember books > articles > blogs > tweets.

But, if you want to stay current I advise you to avoid TV completely and follow these people:

Twitter @IvanTheK

@millenial_inv

@michalebatnick

@Frances_Coppola

@MarkThoma

@cullenroche

@calculatedrisk

@MebFarber

@ReformedBroker

@ritholtz

These people will lead you to all types of reading about investing and beyond.

I will also point out http://aswathdamodaran.blogspot.ca

This guy is into discounted cash flows and is not afraid to show his work in the form of multi-tabbed spreadsheets.

I love these. They bring me back to when I was a kid and did this stuff in Lotus123 (I rarely do them anymore on the computer but I do a shorthand version in my head prior to buying a stock - probably arrogance and laziness rather than wise experience).

Also StockTwits! Download that app to your phone and use it wisely.

Edited August 29, 2015 by msj

[Bonam]

I haven't had that much money for long. So that would be, uhm, say four to five years. On the other hand I'm not some nifty professional wearing a five thousand dollar suit. I just listen to certain people who do. LOL.

Ok, well, my word of caution to you would be... a lot of people can get lucky and outperform the market for a few years... 5, maybe even 10, and let it get to their head and assume that they are that smart/skillful. But a few years later, reality always comes and bites them in the ass. As for listening to other people who can beat the market... anyone who could well and truly and consistently beat the market would keep their ideas to themselves and become a billionaire, rather than giving out their advice.

[msj]

Ok, well, my word of caution to you would be... a lot of people can get lucky and outperform the market for a few years... 5, maybe even 10, and let it get to their head and assume that they are that smart/skillful. As for listening to other people who can beat the market... anyone who could well and truly and consistently beat the market would keep their ideas to themselves and become a billionaire, rather than giving out their advice.

Warren Buffett and Charlie Munger have given out their ideas via Berkshire Hathaway annual reports. Add to that the forms that they fill out that disclose their investments and there you go. Of course, many of their investments tend to simply buy entire businesses so not exactly useful at times.

I like the chart found here showing Buffett's wealth: http://www.marketwatch.com/story/from-6000-to-67-billion-warren-buffetts-wealth-through-the-ages-2015-08-17

From $1 million at age 30 to $25m at 39 to $1.4 billion at 56 to $58 billion at age 83.

Impressive way to show the power of compounding.

Edited August 30, 2015 by msj

[Hudson Jones]

Until the Israelis bomb their oil industry, then watch your investment collapse...

That won't happen without the blessing of Uncle Sam.

Even the Gaza carnage was first coordinated with the Americans before it was launched. Attacking an actual country, with a military is something Israel will not and cannot do without U.S.' backing.

[msj]

Oh nooooooooossss!

What will we do? The sky is falling!! THE. SKY. IS. FALLING!!!

Well, it ain't.

And it's a new month which means I have more cash available.

Once again - for me, the fear of not being invested > the fear of "losses" so whatever, whatever I do what I like....

As usual, know thyself. If you can't stomach the potential for losses then don't invest in the market.

Edited September 1, 2015 by msj

[bush_cheney2004]

Tough day for weak hands, but there is a lesson to be learned. Always keep some powder dry for outstanding buying opportunities on days like this when stocks are oversold. All this excitement in messing with my sleeping in 'til noon every day....have to get up by market open to day trade on the carnage !

Edited September 1, 2015 by bush_cheney2004

[sharkman]

Once it hits 14000, I'll buy in.

[msj]

Tough day for weak hands, but there is a lesson to be learned. Always keep some powder dry for outstanding buying opportunities on days like this when stocks are oversold. All this excitement in messing with my sleeping in 'til noon every day....have to get up by market open to day trade on the carnage !

Different strokes and all that.

I will continue on with my usual monthly contributions and add to the cash position from time to time when I "find" the extra working capital in my business.

If the market could go down and stay flat for the next 15-20 years and then make up for lost time between years 20-25 then I would be very happy.

Would rather spend most of my life buying in down markets and then when it is time to live off the proceeds I would rather sell in up markets; if you know what I mean.

[bush_cheney2004]

Once it hits 14000, I'll buy in.

That'll work too....if the U.S. Fed moves on interest rates this month as originally intended, a 14000 Dow is certainly possible.

[bush_cheney2004]

...Would rather spend most of my life buying in down markets and then when it is time to live off the proceeds I would rather sell in up markets; if you know what I mean.

Understood, but I am working with two different investing objectives and resources....taxable cash accounts and deferred/no tax retirement accounts. The cash accounts are for short term fun, while the retirement accounts have a longer time horizon and bond mix.