For the first 30 or so years of working, saving and investing, you’ll be first in the mode of getting out of the hole (paying down debt), and then building your net worth (that’s wealth accumulation.). But don’t forget, wealth accumulation isn’t the ultimate goal. Decumulation is! (a separate category here at the Hub).
There is growing optimism that the Chinese markets will surprise on the upside as government reforms begin to take hold.
Since the beginning of the year, the country’s macro-economy has stabilized, fuelled by strengthening industrial output, an expanding service sector, rising retail sales, steady growth in electricity generation, power consumption and rail volume, and robust domestic demand.
Valuations are currently quite attractive, following a significant correction in China’s onshore markets from their 2015 highs. Non-financial blue chip companies are presently trading at an average of 15-20 times price/earnings ratio, below their historical highs.
Upside surprise waiting, Barclays says
Recognizing the potential for investors to make gains in China, Barclays Capital recently noted that there is an upside surprise waiting in the wings for China investors. “We think the latest data from China point to continued robust growth,” says Jian Chang of Barclays in Hong Kong.
The resurgence of optimism over China stems from the “new” China economy picking up steam on the back of reform-oriented government policies that are represented by the deliberate shift in focus from export-led to domestic-generated growth.
Based on the widespread media coverage of the 2016 Canadian census this week, Canada’s baby boomers are going to be just as much of a demographic force as ever once they enter their golden years. For the first time, our seniors now outnumber our kids, the CBC reported.
Not all seniors are baby boomers, of course, but sadly the reverse will soon be true: most if not all baby boomers will be seniors. For this generation retirement (or semi-retirement) is a huge looming event, as a quick browse of this site will establish. Hey, just this week I got a package from Service Canada advising me that I will be able to draw Old Age Security (OAS) when I turn 65 next April. And I intend to take it then too, as I wrote in MoneySense last August: Why I’m taking OAS right at 65.
Boomers need to face up to their own mortality
All of which suggests it’s time for Canadian boomers to start looking more seriously at their own mortality and the admittedly dreary topic of estate planning. I covered this Thursday in my latest MoneySense Retired Money column: Retirees need to start thinking ahead.
In my Financial Post article that ran on Wednesday, I looked at estate planning from a different perspective: how the original “Wealthy Boomer” — Donald Trump — is tapping his family members for senior roles in his administration and possibly for his business succession planning. Click on Donald Trump is upping the ante in the Wealth Transfer game.
One of the sources for the FP piece was business transition and valuation expert Ian Campbell, pictured. (He himself admits to his strong resemblance to investing legend Warren Buffett!). By coincidence I reached out to Ian about the Trump piece just as he had published a blog on that very topic. It ran on the Hub Wednesday under the headline Generational Business Transaction: The Apprentice. Check the links to his site for his free newsletter.
The Truth about Working in Retirement
Our best-selling (G&M, Amazon among others) book, Victory Lap Retirement, continues to get some positive reviews. Earlier this week Ellen Roseman of Toronto Star fame wrote the following review on Golden Girl Finance: The Truth about Working in Retirement. As Ellen recounts, she herself has retired from her full-time newspaper gig but continues to be fairly busy in the semi-retirement described in our book.
Mutual fund companies Excel Funds, Franklin Templeton enter ETF business
Finally, some big news in the asset management industry, where it was announced that two Canadian mutual fund companies — Excel Funds Management and Franklin Templeton Investments — are entering the ETF business. The Globe & Mail’s Clare O’Hara reported this on May 2nd. Click on Franklin Templeton, Excel Funds to enter Canadian ETF market.
We’ve all heard of domain names purchased 10 years ago for $10 dollars and selling for $20 million today — or some other story of similar nature. As a result, you might be interested in buying and selling domain names either full-or-part-time for profit. It seems so easy and simple: just pick the right domain name, hold on to it for a while then sell for profit.
But is it really that simple? Well, since everyone is online –you can imagine that the ocean is wide. And you don’t want to start with a bit of research. You need a map, and we’ve created one for you here.
There are millions of domains already registered, especially the easiest ones that consist of one word such as apple.com, Facebook.com and so on. On the other hand, there are countless combinations of available domain names to register, especially if you consider the thousands of new domain name extensions such as .ng domain or .eu domain names.
As you can see, it is critical to keep your focus narrow. What subjects are you already familiar with, which can make the process much simpler? Do you have experience with animals or tech? Have you worked in the entertainment or service industry? Think about the industries you are most familiar with first, and start with that. Why is this important? Well, you don’t want to target prospective buyers based on their potential for sales if you don’t have insight into the industry you are aiming at.
In other words, don’t just rush to buy multiple domain names you think would appeal to health care clinics you’ve identified as potential buyers. You might not be aware of any industry-specific rules that govern facets of legal advertising. You won’t make much of a profit, if any, if you buy domain names your target audience can’t use. This is where it pays off to take the time to understand your audience.
Real estate investors often fail to objectively assess their existing portfolios in the same way that a holistic wealth management professional or financial planner would when dealing with equity investments.
Many real estate investors who began their investment careers following sound investment principles have got caught up in the hype and strayed from their core investment principles. When a particular asset class performs well, there is often a sentiment of irrational exuberance that develops around that asset class. When this happens, savvy investors adapt their strategy while others continue to “go with the herd” and experience the eroding effects of inertia.
The problem is highlighted today in two key ways:
Yield on Toronto and Vancouver Real Estate Has Diminished: Rising real estate prices in these markets have outstripped the increase in rental rates that has eroded yields. This now means many real estate investors are over-weighted in one asset class, and that many new real estate investments are in reality speculative-grade investments because they don’t meet the suggested 3% interest rate cushion to sustain cash flow (a metric outlined in more detail in my recent book on borrowing to invest).
Investors are Demonstrating Irrational Exuberance and Greed Towards Real Estate: I’m deeply concerned by the number of people who believe real estate values will continue to climb at these uncharacteristically high levels. Not only are current appreciation rates unsustainable, but the fact that rental increases are not even close to keeping pace makes real estate investment even less appealing.
There are too many investing in real estate who are chasing returns through appreciation alone. There’s an alarmingly high net inflow of money to real estate in overpriced markets even as yields continue to plummet.
In a noticeable turn of events, one of the key talking points for the 2017 investment landscape has been the potential return of inflation. Indeed, only a little more than a year ago, a rather different take on this topic was dominating market discussion: deflation. However, since the results of the U.S. election became known, market participants began to shift their focus to what is being referred to as the “Trump Reflation Trade.”
Quite simply, the logic behind this “trade” is that fiscal stimulus will now take the baton from monetary policy and provide a newfound jolt to the economy, spurring potentially higher growth and elevated inflation readings, accordingly. For the most part, the financial markets appeared to buy into this line of reasoning, as the S&P 500 has risen +10% since Election Day while the U.S. Treasury (UST)10-Year yield has climbed by about 65 basis points (bps) during this same time frame. Interestingly, broader commodity prices, as measured by the Thomson Reuters/CoreCommodity CRB Index, rose in the two-month period following the election to as high as +6.3% but have since reversed course and were basically unchanged as of this writing.
The most widely followed inflation gauge in the U.S. is the Consumer Price Index (CPI). This monthly report is released by the Bureau of Labor Statistics (BLS), with both the overall and core (excluding food and energy) readings receiving the most attention.
Inflation rise of 2.7% highest in 5 years
The February CPI report revealed that overall inflation rose at a year-over-year rate of +2.7%, the highest in almost five years. Continue Reading…