Wednesday, December 14, 2016

'Doing nothing' is so difficult to do

Doing nothing is one of the most difficult things for an investor to do. A portfolio is like a garden. You have taken out the weeds (as much as you can); you have seeded your garden for the hot summer that is hopefully to come and, really, how can you protect your garden from an occasional hail storm? Somethings are just beyond your control.
Your portfolio is as diversified or concentrated as you want it; you have eliminated the bad performers; by taken some losses from past mistakes (yes we all make those) you have built up a tax cushion for future capital gains. You bought value stocks to enjoy the next leg-up in the commodities market and your long-time holdings are balanced so no individual holding exceeds 5%.  Now it is waiting for the investment world to unfold – hopefully most beneficial to you. You have also cash just in case that once-in-a-life-time opportunity knocks on your door.  There are always other investment ideas coming past you but should you switch holdings just because you have nothing else to do?
No. It is the time between seeding and harvest. It is difficult to sit on your hands, clipping bond coupons and receiving dividends. What else can you do?  You may get second thoughts; things take longer than you hoped for. Sometimes just sitting there waiting for things to come your way seems make time crawl at a snail’s pace. Your fingers itch; you want to do something; after all you are a person of action and decisions, although carefully thought out, are usually easy for you to make. But… right now anything you do is not really adding any value, except waiting for the market to take off. What if? No, you are waiting for the harvest; changing things now is running the risk to make matters worse instead of better. This is the time where somethings gnaw in your belly; why are things not happening? Did you make a mistake after all?  Is there something you overlooked?
Doing nothing is oh so difficult but probably the best thing to do in many cases. Investing is not about perfection; things have only to be more often right than wrong. But… but… just let your seedlings grow and above all; cut your losses and let your profits run. If there are no losses; be a man and do NOTHING! Really, for many of us this is soooooo difficult but when things are in place, good is typically good enough. If it isn’t broke don’t fix it… that only costs money.
Once things happen they often happen fast and like a world champion you have already thought over all the scenarios and how to react if they come to be. Waiting for the ‘New Year’ is typically one of those times that you should only review your portfolio and do nothing. Just spend time with your family; relax and enjoy the holidays.  I know, you feel you should not relax, but that is why we have year-end: to do nothing and enjoy with your loved ones those last days of the year. Nobody else is working! Why should you?
Merry Christmas and a Prosperous 2017. 

Tuesday, December 13, 2016

2017 Here we go!

Bullish or Bearish doesn’t matter. This market turns on a dime or cheap rumor. We had a fabulous yearend-trumpish rally. Some say it will stop after Jan 20 – inauguration day; others say whatever… I can’t remember so much noise that is directed at investors these days. Don’t only turn off the TV but also your email! A lot is speculation about the impact of Trump politics but it may take a while before that is implemented. So, don’t get too excited. In fact, if you own Canadian banks it may be prudent to take profits… especially so if your portfolio allocation is a bit off after their enormous rally.
Next year will be another good year for energy… and I hope that Alberta Gov noise will dim a bit sooner rather than later. I was willing to give Nutley … really the spell checker lets me not write that differently… a chance but the more I hear the more I pray for a one-term government so that Albertans learn not to elect those people for another 40 years. And then we have that guy in Ottawa with pretty curls and apparently as corrupt as past liberals. Where is this country coming to?
But the good news is that oil and gas are coming back. So is inflation. Stay away from bonds, even short term bonds. Especially after tax they are just a liability. If you are afraid of the stock market just stay in cash. Yes, I am still bearish with the seven-year bull market getting tired. Yes Trump may bring in new optimism but we need increasing earnings not cheerleaders. The odds are good for Calgary and Alberta to turn around next year, provided She-in-Edmonton (see how deftly I avoid that nasty spellchecker?) does not too many crazy things. And starting 2018 it is only one more year before liberty knocks on the door – that is provided dogmatic PC-ers step aside and our right-of-center people get their act together. But then again, for some the Donald represents the political center… duuuh… yeah right J. Great pun? Bad?... No way!
Simplest rule is that the higher a market goes, the higher the risk. Hence take profits and focus on value for solid businesses and other good assets. I still feel that gold belongs in everyone’s portfolio but not more than 5%. It is insurance, just in case Hillary declares war on Putin … So who is really crazy? It is clear the people are tired of the intellectual and political elites. They are tired of political correctness and hopefully of the climate change religion. Really, Is there no other environmental concern than CO2 that we can put some common-sense dollars in?
So the government issues debt to finance its plans including infrastructure and the Central Bank is buying that debt so that there is an oversupply of pop-mom cash that  can’t find money yielding investments other than dividend paying stocks in a seven-year old and tired bull market - thus risking their retirement pennies while the government is spending it irresponsibly. Please, don’t fall for this racket instead build cash. I still recommend 20 – 30% cash plus 5% of gold.  (Really, I start to sound like Bill Bonner and his Deep State").
If oil is about to turn expect the Alberta real estate market to bottom over the coming 6 to 12 months. Maybe there is opportunity especially in non-residential stuff as Motley – ouch with a spellchecker like that who needs enemies? – is likely to implement rent controls. Anything that damaged the Ontario economy, She-in-Edmonton is likely to try in Alberta. So, guess what… if you renovate your rental properties now, there is a good chance that you will not make your money back. Slums are coming soon to a place in Alberta near you! Let’s turn Forest lawn into Vancouver East.
At least Boy Wonder has approved some pipelines. Give him some credit, but then he is probably counting on his ‘democratic’ activist buddies to defy the rules and commit violence against anyone with a shovel near a potential pipeline trajectory.  You see, then Justin can say – of course in Quebecois French: ‘Ich habe es nicht gewust’. Europe went through a stage like this in the 1980s and 1990s and see what happened there. I like Europe it is great for vacations… but living there… no way and now the same attitudes are washing over our beloved Canada… Proud and once free.
For 2017 be careful don’t get dragged along with the herd over the stock market cliff. Don’t sell everything but take profits along the way. Build your stash of cash. Also, use your TSFA to the max but only invest conservatively. You may be amazed as to how market indexes performed versus active investing over the last decade. Just be patient and wait for the stock market to be cheap again before investing in proven assets at rock bottom prices.
There is something to be said for ‘buy and hold’ if you can, with some confidence, predict earnings five to ten years out. That is the Warren Buffett way. But then there are commodities which are much more treacherous. Sell once you make your profit and only buy when those commodity producers are dirt… dirt cheap. Commodities are trading-stocks that go up and down. If you keep holding on, your profits may evaporate and you end up at the same price as you purchased them for or… worse
Well there is my advice for 2017 maybe a bit jaded and cynical… but right now it is ‘better safe than sorry’.

By the way, if you didn’t like what the spell checker did with Rachel’s last name, try Trump or trumpish. I’ll give you a hint: Frump or frumpish.