rb
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Posts posted by rb
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There are some very valid points raised against indexes on here. I'll try to add a bit more colour.
1. What you actually own while holding and index. A point was raised that you don't actually know what's in it - which is fair in the context of the poster. A lot of other times is because you know what's in it. A lot of investors really do not want to hold certain companies. From my experience a lot of times it's tobacco and weapons. But the industries really run the spectrum. And people REALLY have strong feelings about what they don't want to own.
1.1 A particular case of what can go wrong with indexes. This is from memory so figures may be a bit off here and there but not my much. In late 90s Canada Nortel rose to be over 1/3 of the whole index. Its market cap got to about $400 Bn. It was worth a multiple of the 5 big Canadian banks put together. I can't remember if the multiple was 3 or 5, but i think it was 5. Today the big 5 are worth $488 Bn and Nortel is no longer with us. Everyone beat the index if they didn't own Nortel.
1.2 I'm sure there are similar stories elsewhere in the world.
2. What actually is an index? If you're Warren Buffett you'd say S&P 500. But index investing really is pleading ignorance to business, finance, really everything. So if one is truly ignorant ignorant, one would say I'd want a piece of everything. That is a global index market weight by geography and all. Based in that decision you would have relatively done very well during the 2000s but not so well during the 2010s. Relative to what is the big question. It really shouldn't be a question. You did average by definition. But I'm willing to bet a steak dinner that people in the global fund were feeling pretty smug during the 2000s but kinda crappy during the 2010s. So much for ignorance.
3. Largely the index mentality (striving for mediocrity) is absent from the real world. The wealthy segment of western societies is mainly made up by business owners. These people's wealth is concentrated in equity and they are woefully undiversified. And they do not care about that one bit. You never see a meeting of business owners where someone comes and explains indexing to them. You're more likely than not to underperfom the index so you should shut down/sell your business and put your capital in an index fund. You don't see that because you can measure with an egg timer the time before that speaker is laughed out of the room.
3.1 This is neither here nor there. But I find it paradoxical that people that people that hate the grind of investing and are great believers in indexing spend time on a value investing board. One would think that their money is in index funds and they would peruse more pleasurable activities such as chasing after a girl, hammering the wife, reading a book, or checking out that nice new restaurant down the street. I'd add watching a good movie but there aren't that many of those anymore.
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Thanks for posting. Demographia always puts out good stuff.
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Also, perhaps getting a little too much into a philosophical angle here, but who's to say that the entire "its impossible to beat the market" campaign thats been growing the past few years isnt some wonderfully orchestrated marketing campaign promoted by companies like Vangard? Meant to discourage investors from even trying and just toss the money into an index fund?
Honestly I don't even know why "beating the market" is even that important to people. To me, I couldn't care less. It is utterly irrelevant how my investments perform compared to the market. As long as I am intimately familiar with what I am invested in and comfortable enough with what I own, I don't care about all the other noise. Its kind of even comparable to the market timing approach. You think Buffett really said "I'm banking on a turnaround at BofA" in 2011? Or do you think he simply found himself a great deal and was comfortable making the investment? I'd compare it to trying to hit a home run in baseball. Typically when you try to hit it out of the park, you grip the bat too tight and swing at bad pitches. Whereas when you just relax and pick your spots, life is a lot easier. I consider trying to beat the market just another unnecessary distraction that complicates one's decision making and adds unneeded stress.
This is very much true as well. Beating the index is a very popular topic on CoBF. In real life not so much. People don't really care if their investments beat the index. Mostly they just want their money to be safe and earn a decent/good return. You really find out how much people don't care about beating indexes the moment when you see a client and you tell him that he's down 15% but he should be happy because he's beat the index by 500 basis points. If people's overarching goal in investing is to beat the S&P500 or whatever then no one would buy any bonds.
It's also true that investors obsessed with beating indexes will probably fail to do so. Just go out there, do your best, do good work and stop worrying about the index so much.
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Why are detached homes in Vancouver selling for 15-20% lower prices than last June?
Did anything other than the ability to borrow because of the tighter mortgage rules change? Or is Vancouver suddenly not as good as Toronto? I thought the argument was that Vancouver was the best and all the rich people were moving here? Suddenly the rich people prefer Toronto?
Another thought exercise - last winter/spring - people were flipping homes for $100k more than their purchase within 24 hours. Why did people feel the need to pay $100k more for the same property by the end of the day? Did the lifestyle in Vancouver improve by 10% within 24 hours or was it their incomes that increase by 10%?
Yes, after being up 30% yoy a few months ago which is basically what wisdom said.
There was a rush of sales activity prior to the foreign tax being enacted. Plus changes in mix of sales in any given month so the average figure may not be as comparable. Anyway, y/y February sales prices were up 14% from what I've read. Sales activity is slowing for sure though.
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Politically correct, ignorant, whatever, all are the labelled cost of having an opinion these days. Opinions are not fact, they can be right or wrong, nonetheless its just an outside observation the I have found to have some merit, IMO. There's an attitude prevalent amongst many Americans in today's day(not just relating to investments btw) and age which I best describe as "do it for me". I have found, again solely from my own experience, the Canadian mentality is different. I guess if we call it "Canadian conservatism" its more acceptable. Hedge fund I guess can be defined differently, although I suppose my reference was more in relation to broader investment management. From my little perch here in America, I have no problem saying that I've found Canadians to be savvier and more financially cognizant than my fellow Americans. If I offend anyone north of the boarder with this sweeping generalization, I apologize.
Gregmal I'm sorry if you misunderstood me. My comment about ignorance was not directed at your opinion but to the opinion of the poster before you. I don't think that there's anything wrong about what you wrote in your post.
In terms of opinions, yes they are not fact. But they should be based on facts otherwise one is just talking out of ones ass and the respective opinion is an ignorant one - ignorant of the facts. i.e Population not highly concentrated near financial centre - when 20% of population lives in the Toronto area alone -a financial centre. Labeling it such is not societal tyranny. It is simply correct.
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One of the main reasons why it's hard to beat an index is career risk. It's really hard to beat an index when you don't really try to beat an index. Being an IM/PM is actually a pretty sweet gig. You make at least 250K, the hours are good, the downside is that every now and then you need to go suck up to a big client.
In order to beat the index, your portfolio will look very different from the index. It will have low correlation to the index and thus big deviations both up and down from the index. When you have a positive deviation you'll get a pat on the back and an attaboy. Maybe you get to take a victory lap or 2. When you have a negative deviation you get fired.
So where's the incentive to beat the index?
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When you have 4 out of 5 Canadian banks (BANKS!) calling the real estate market nuts you know that you have a problem.
The 5th one is of course a perennial candidate for the short in a long/short position.
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Look, I'm gonna try to cut through all the BS here and say give an old man a break. It's true that so called SJWs and the PC police can sometime go too far. It all depends on the context. It's clear that Buffett didn't mean any ill will here. Even though it's surprising that he chose a poor phrase considering that he's so careful in choosing his words. In addition most of us on this board know what he isn't one of the most socially adjusted people. He was probably just trying to be funny and folksy and one got away from him. It happens to all of us and to the best of us so let's lay off.
To the rest of you who are complaining about SJWs and PC ruining the country gimme a break. The moment you have people in the streets of New Haven, Connecticut chanting "No means yes, yes means anal" you have a problem as a society and you need SJWs and the PC police. Fix that problem and then complain about SJWs and the PC police but not before.
Let the hate mail come.
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Which is exactly why it is not deterring me from starting one. As you said, if you provide a good service, you charge a fair price. You are right that hedge fund is a broad term, almost similar to the term "literally." As for thinking from a business perspective, it is nice to have perspective on the industry and know the nuances. That way you can learn the needs and wants, and hopefully provide value.
Never knew that family offices were popular in Canada, then again, why would family offices advertise themselves. However if a manager is that good to be hired by a family, why not set off on their own? Not that everything is driven by compensation, and the need to have "more," but it is unusual in a capitalistic society. One would think that if their returns are good, they would open up shop and have more than one family as a client. However, the more plausible case is that I misunderstood you, so if you can provide clarification... it would be appreciated.
Oh, family offices are very popular in Canada. And as you say, they have no incentive to advertise themselves. Also there are families that band together and form a family office. The reason why it's hard to branch out and service family offices is the same reason that family offices exist in the first place. A need for a highly customized service that go way beyond a "Dear Partner" letter.
One thing to note in Canada especially in the high net worth and ultra net worth segments is that performance is not all that matters. They care about making money but they care more about how you make that money. Performance against a benchmark is not very important as opposed to performance towards what goals they may have.
Again this comes to service. Don't think that you can make an extra 20 bp or 100 bp or whatever and clients are gonna come flocking to you. Even if some do, that's probably not the clients you want to have. My best advice is look at the clients you can attract and design a service for them. If you want to pursue a general market strategy it's not likely to be successful.
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I'm sorry Gregmal, but I don't think that politically incorrect is the right word. Ignorant may be more correct of the above post.
Firstly, way more people live close to financial centres in Canada compared to the US.
Secondly, what's the difference between 2-3% MER and 2 and 20?
Addressing the original question - what exactly is a hedge fund? Hedge funds run the entire spectrum, anything can be defined as a hedge fund. I think the only differentiation is whether the fund charges a performance fee or not.
Reasons why you may see a lot of US style hedge funds is that we have a lot of family offices in Canada. So wealthy families have in house hedge funds as opposed to farming that stuff out. This way they save a lot on fees.
There is definitely a more conservative approach to investing in Canada as well - good luck trying to sell a junk bond issue up here. But as funds run the gamut it doesn't translate in an attitude against HF. However being an HF (whatever that means) doesn't make you a superior investment by default. What Canadian conservatism does is that it won't allocate assets to HF as a class as it does in the US where you'll have a consultant that says you need to have X% in hedge funds and the clients will dutifully oblige (I'm aware that that statement may be a bit ignorant on my end as well).
To the OP, stop thinking of things in terms of labels and norms such as hedge fund and 2 and 20. Think of it from the side of a business. Provide a good service, charge a fair price for it.
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The Canadian system is so easy to game that it's not even funny. Too many loopholes in an environment where the lenders and borrowers have had only incentives to lie and cheat the system. You just need to talk to a broker or a lender and they will teach you how to play the game so that they can make their commissions or targets.
The amount of gaming the system that has gone on for over 10 years should be exposed once the tide goes out. It will surprise Canadians and regulators who have held the false belief that our system is better than Americans and thus we can carry more debt.
Except for conjecture, do you have any real facts to back up these claims? I'm honestly curious.
The countless articles that have been written about all this stuff that's going on and how it's done is not enough? What exactly are you looking for? Being a member of CoBF doesn't give you subpoena power.
Frank, are you a realtor?
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Buffett wouldn't sell it because he wouldn't want to take the tax hit on the capital gains. There's a reason he didn't go out and buy a bunch of homes in 2012 and lack of funds wasn't one of them.
Also btw, I wouldn't want to buy anything that Blackstone is selling.
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I agree that there's a lot of good TV these days. But as you said a lot of it is on places like HBO, Netflix, Showtime. On regular TV (basic cable whatever you wanna call it) there is a tonne of crap - see all the reality TV that's playing.
The scripted stuff (not that reality TV isn't scripted) on networks has improved somewhat as well NCIS for example tries harder than JAG. Maybe because it was pushed to do so by the HBO stuff. But when you have to do NCIS New Orleans you clearly have a crisis of creativity.
I'm not sure what the reason for all of this is. Maybe it's media and advertising cycles as the OP says. But it could also be a result of Hollywood dislocation. As Hollywood decided to do lots of high budget crap features with superheroes it pushed talent into the TV world. Today you have good movie actors (including academy award winning actors) doing TV - see Kevin Spacey with HOC, and lots with Westworld, True Detective, Big Little Lies, etc. If you use better talent you'll get a better product.
Maybe this is not even TV. Maybe there's TV which is full of crap. There are features which do whatever they do. And there's a new category of HBO/Showtime/Netflix/Amazon that's higher quality and fits between the 2.
In the end I'm not sure what the reason is for the high quality stuff we get to watch but I sure am enjoying it. :)
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Governments around the world are covert and sneaky. Inflation is the preferred method to paper over so many social ills like your neighbour paying full taxes ethically while your other neighbour is offshore and pays nothing. Markets must go up to compensate for such social ills. Also, governments eventually bail out everything, via the banks and via the tax payer. So sure, maybe nothing bad happens and things march ever higher. But they are marching higher because the currency is being debased. Who suffers most from inflation? Those without any assets. But even those with assets must earn a real return or they are still getting poorer. All this plays out over a long time sometimes. Real estate will be the same. It's always a transfer of wealth from someone to someone else.
That is wrong in almost every single way.
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Ask the people who bought in Toronto in 1989 how long it took them to get back to where they started. I'll give you a hint: The year starts with a 2.
And during that period rates went down. A LOT!
In other news banks are not very interested in taking credit risk in mortgages:
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Without getting into specifics, I would say that the mortgage underwriting in Canada is substantially different than what took place in the US. In fact, I would say that the whole system is entirely different from that of the US. Comparing the two, in my view, is a major false equivalence that has been repeated ad nauseum by some economists.
Soundness cannot be solely evaluated on debt-to-income ratios. For one, Canadians have a lot more equity in their homes. And second, the cost to service that $1 in debt has declined substantially.
Also, you're painting the US with a broad brush when in fact the US housing collapse was particularly prominent in a few locations. Moreover, it's not the average home buyer that caused the most damage - it was the marginal buyer. So using simple average measures to gauge safety can be misleading.
This is unbelievable.
So debt-to-income rations now don't matter in lending. And Canadian mortgage underwriting is substantially different from the US..... because it's driven mainly by income ratios. <head scratch>. In addition banks don't really have a way to independently verify borrower income and there have been lots documented cases of doctored income.
Also as you said average figures don't matter and in the US the marginal buyer was the problem. So Canada is ok because on average Canadians have more equity in their homes and the marginal buyer until recently was able to buy property with 2% down and thanks to a new program in BC they can buy with 0% down over there. Got it.
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Banks may have a higher ability to absorb losses, but, the rest of it is the same or worse.
Can you explain to me mathematically how does this work:
Americans were too leveraged and had sub-prime thus they ended up with 69% home ownership and $1.5 in debt for every $1 of disposable income.
Yet, the risk averse Canadians have 70% home ownership and $1.67 in debt for every $1 of disposable income.
How does a $1 in income earned in CAD allow one to be prudent and risk averse yet carry more debt?
And the 70% home ownership is not including all those rich foreigners buying up Canadian real estate with all cash.
PS. I would argue that the risk in Canada is concentrated in 2 spots with an economy that is not as diversified as the US.
In addition there's the distribution of the debt that isn't covered by overall statistics. In Canada the % of mortgage free households is in the 40s. Pre-crash in the US it was in the 20s. So debt in Canada is more concentrated than it was in the US and thus the indebted households are more levered and vulnerable.
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It's true that the demand from baby boomers are dying out but I believe all projections point to an increase in population due to immigration, planning around 150k-300k per year. New immigrants likely won't find relatives, friends nor jobs beyond all the major cities.
Housing prices is a function of income and leverage applied. I can see how prices would come down if 1. unemployment rates go up 2. interest rates go up. both are actual factors that will make mortgage payment affordable and lower the demand for rental units.
1. is dependent on the economy, and no one has the crystal ball.
2. is something that would likely be artificially kept low. The government both left and right have every incentive to keep the housing market up. I find it hard to imagine a scenario where the government keeps rate high as housing prices come down.
Yes immigration will continue but the fact is that immigration is nothing new. Canada has had immigration for decades. During that time house prices went up, house prices went down, and house prices went sideways.
The idea that the government will prop up real estate with low rates sounds good in theory. Except that interest rates are low right now and real estate ownership is already expensive at current rate levels.
In addition I don't understand the arguments that Canada cannot have a US style crash. If prices take a 30% hit they would be down to the level they were roughly one and a half years ago and real estate wasn't exactly a bargain back then.
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OK - i don't need to be a math wizard to know those who rented when my dad started out vs those who bought - the latter are doing better now -
OK just keep renting. we'll know who is right in 30 years....
Gary
Ahhh... the great theory of value investing: go out and buy assets that have had very large run up in prices.
Maybe you should compare your dad's situation to a guy who rented and put his down payment, and savings from repairs, forced principal payments, prop tax etc into BRK and see how that latter guy did vs ur dad. You don't need to be a math wizard for that either.
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Real estate is a leveraged asset in most cases. Since 1981, the cost of borrowing money in Canada has fallen from the peak. Over the same period of time, many households moved from one income earner in the household to two. So, for 37 years the cost of borrowing money has been falling while household income was increasing. It's not surprising then that leveraged assets like real estate were driven up. Especially in a city like Vancouver where land supply is tight. Mountains in the North, water to the West, a border to the South with protected farmland to the East against the backdrop of more mountains. The building in Vancouver these days is up. Vertically. Assessed values are dominated by land values.
Looking forward, a change in interest rates increasing the cost of borrowing would likely create a shakeout for the overleveraged, but longer term the land will remain a valuable asset.
Don't forget structurally weaker demand and more supply coming in the future as the baby boomers start to die off. Basically all the tail winds that real estate had over the past 30 years are basically turning into headwinds over the next 30.
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I am disappointed that any one on this site would lack the fundamental knowledge of a tax return. I should ignore the comment as leftist hate instead.
So expecting Donald Trump to follow more than 4 decades of precedent on information disclosure for the office of President is leftist hate. But thinking that Obama's refusal to release his college records (for which there isn't such expectation) is sketchy is totally reasonable. I see your logic there.
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But I wouldn't call the birthers crazy either. There are plenty of issues with both Obama's birth certificate and college record that he could have been more forthright with them. It took him years to share his birth certificate, and that thing is sketchy as hell, and to this day he has refused to share his college record. Given that and all the suspicions, I'd take terrible odds on a bet that he actually isn't a US citizen. But again, that doesn't matter to me.
Note: if you're curious why I would vote twice for a guy based only on the way he carried himself, even though I detested what he was actually doing, pre-Trump they all sucked beans. I felt, what the hell, Romney will be as bad anyway. They all lied, they all bullshitted, not an iota of their public appearance was ever real. They did what their party's and pac's told them to do, America be damned. Between Reagan to Trump the swamp had become so bad no one cared about voting anymore.
Wow, you really love disclosure and transparency right. There are still questions about the birth certificate? I guess you guys aren't satisfied until Obama shows up and presents it to you personally. Then it's onto college records. You really like presidents to be really forthright with those things. In the same spirit I suspect that you are OUTRAGED by Trump's refusal to release his tax returns, never mind his college records.
As for lies and bullshit you've gotta be kidding me. The Trump Administration lies like crazy.
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Oh, right. Thanks
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Does anyone know what was that giant policy that pushed float over 100 B?
Banana republic
in General Discussion
Posted
Seriously, is this guy trying to get impeached?
Or is something bad about to happen to America and he's trying to get a bad news cycle to distract from a worse news cycle? Somehow waving a flag saying I have a FISA warrant against me doesn't seem like a sensible decision.