Tag Archives: TINA

TIARA: There Is a Real Alternative

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Designed Wealth Management

By John De Goey, CFP, CIM

Special to the Financial Independence Hub

By now, you’ve likely heard the term FOMO: the Fear of Missing Out.  You’ve likely also heard the term TINA: There Is No Alternative.

Taken together, these handy little pop culture acronyms explain a good deal of what has gone on in capital markets over the past three years or so. I’d like to take this opportunity to push back a little on the second one.  Based on current valuations, there may not be a sensible alternative to stocks, bonds, and real estate, but there may well be an alternative in …. wait for it…. alternatives.

Alternative assets are varied and the term ‘alternative’ could mean different things to different people. The asset class is known on a non-correlated basis by offering opportunities in such varied assets as infrastructure, liquid alternatives, structured notes, and hedge funds.  While I personally dislike the last option due to high fees, illiquidity, and opaque reporting, depending on client objectives and risk tolerance, I believe there’s often a strong case that can be made for adding alternatives to your portfolio.  As such, here’s a new term: TIARA. It stands for: There Is A Real Alternative.  You’re not stuck with having to only choose between some combination of stocks and bonds. [Editor’s Note: John De Goey coined this term.]

A third major Asset Class

In the past half decade or so, many more traditional asset allocation strategies have changed significantly as bond yields have declined.   The asset class that has been gaining the most traction is alternatives. Continue Reading…

Are people denying the Real Estate Bubble, too?

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Will Ottawa move to deflate the housing bubble by taxing gains on principal residences in today’s federal budget?

 By John De Goey, CFP, CIM

Special to the Financial Independence Hub

By now, you’ll know that I have been alarmed by stock market valuations for a long time.  Late 2019, in fact.  Recently, I pointed out that the bond market is severely stretched based on current valuations.  It is now time to complete the TINA Trifecta by examining real estate.

Depending on which market you live in, real estate in Canada is likely somewhere between “pricey” and “there is no hope in hell for my kids to ever be homeowners.” In the greater Toronto area where I live, the consensus price increase in real estate over the past three years or so is about 30%.  No wonder there’s speculation that today’s federal budget will include a capital gains tax inclusion on principal residences.

From a financial planning perspective, it is considered prudent to expect real estate prices to increase at about the same rate as wage inflation.  Inflation has been hovering at around 2% for over thirty years now.  Wages have been essentially stagnant over that timeframe. Stated differently, we’re already gone nearly a third of a century with real estate outpacing prudent expectations.  That’s what TINA [There Is No Alternative] does.  There is literally no alternative because everything is expensive to buy, but ridiculously cheap to own: in terms of financing and the cost of carry.

The Great Covid Bubble?

Central banks started lowering rates aggressively in early March 2020.  Government cheques started to be sent out about a month later.  Over the past 13 months or so, we’ve reached the point where the combined effects of fiscal and monetary stimulus have created a valuation monster that touches on all major asset classes.  Stocks, bonds and real estate are all flashing red in terms of historical valuations.  Someday, people could look back on this unprecedented confluence of circumstances and call it the “Great COVID Bubble.” Continue Reading…

Bullshift Culprits 1 and 2: FOMO and TINA

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By John De Goey, CFP, CIM

Special to the Financial Independence Hub

Bullshift Culprit #1 FOMO (Fear of Missing Out)

For anyone who has been out of the loop, there are a number of acronyms and memes that have popped up over the past decade that help commentators to capture contemporary zeitgeist.  One of the most popular is FOMO – the Fear Of Missing Out.  The basic idea here is that other people are doing something (having fun, getting rich, cheating the tax man) that others want to get in on.

Getting in on things is all fine and well, provided they are legal.  Many aspects of FOMO are indeed legal and it should be obvious that there are social risks associated with wanting to do things that are not.  The thing to note is that there’s strong social pressure to participate – largely because there is some form of social proof that makes it seem as though everyone else is doing it, too (and getting away with it). If there’s one thing that upwardly-mobile people hate, it’s the notion that they are not ‘keeping up with the Joneses’ when they quite easily could be – if they only did whatever it was the Joneses are doing to give them the status / income / happiness edge they have in the first place.

Of all the possible examples of FOMO, getting rich by playing the stock market may well be the most insidious and the most common.  Anyone with seed money can do it.  No matter how rich or poor you are, if there’s a sense that you can make (say) an “easy 15%” on your money by investing in security X or product Y and that Betty and Bob in marketing both did it (and showed you their quarter end statements to prove it), the pull is often irresistible.  This can sometimes be fodder for something called “greater fool theory.”

Most real investors say “buy low; sell high,” but it needs to be noted that there is a segment of the population that makes money by using the principle of “buy higher; sell higher.” As long as there’s a ‘greater fool’ out there who is prepared to pay even more than the outrageous price you paid for something, you can make money by paying an outrageously high price to begin with.  This is a bit like a game of chicken or musical chairs.  At some point, the market runs out of ‘fools’.  In finance lingo, that’s when the bubble bursts. Continue Reading…