CIBC says Fairfax is likely to be added to the S&P/TSX 60 in December 2024 - sell decisions

[Jaygo]

43 minutes ago, Castanza said:

What you're seeing is the results of societal (US) individual spending addiction problem exacerbated by inflation. I would believe it is difficult to accumulate assets if I didn't see so many 20 something year olds with $3k mortgage payments, $1k car payments, 80k in student debt with 5k yearly vacation budgets all on combined incomes of less than 150k.

Dumb is dumb though. The above situation is plainly dumb. If a not so brilliant but hard working guy wants to borrow from his future wages to take a 5K trip he's in trouble. If he borrows from his future wages to buy into the NA economy I feel that's a wise decision at this stage. I did mine without debt until my first mortgage but had I layered on some debt to invest in the markets and stuck it out I could be much further ahead.

 

I started this journey a few years ago via a Smith Manouver and its frankly the biggest Bonanza I could have hoped for. Luck and this forum have been on my side. Tax breaks on interest, low taxes on dividends and 108% return thus far. It beats real estate and it beats lump sums on an RRSP.

 

You guys on this forum have been discussing Fairfax and the index inclusion for how long? 3 months ago I think @SafetyinNumbers mentioned it. @Viking has been by our side, holding our hands and saying Jaygo its cheap, its going to be ok. 

 

Buying more Fairfax a few months ago was a calculated risk. Not too much downside with far higher odds of upside. A largely bright future discounting any cataclysms. So I doubled down and borrowed more to buy it. I dont see that as inherently risky. I see it as taking next years earnings today tax free. Buying into a high odds probability and waiting a few months to let that play out. If FFH goes to zero I will have wasted 1 year of my working life to pay that back (less after tax) If FFH doubles I will have gained one year of working life (more after tax) 

 

Please explain @Parsad how that is not a good bet at this stage of my life? Also just to make everyone comfortable I am in no way putting a potential loss on anyone. I'm a big boy who makes his own decisions.

 

 

[Castanza]

4 minutes ago, Jaygo said:

Dumb is dumb though. The above situation is plainly dumb. If a not so brilliant but hard working guy wants to borrow from his future wages to take a 5K trip he's in trouble. If he borrows from his future wages to buy into the NA economy I feel that's a wise decision at this stage. I did mine without debt until my first mortgage but had I layered on some debt to invest in the markets and stuck it out I could be much further ahead.

 

I hear you on this and understand the mindset. I just think the future is never as clear as it seems. I try to assign more value to lessons of the past then predictions of the future. The NA economy is not immortal and though things may seem good, you never know what tomorrow holds. I think there is a balance to be had and too far in either direction can lead to poor outcomes. History is in the making not just in the past! Skeptical optimism is how I try to approach life. 

 

I was thinking the other day what the bankers and well to do business owners in Ukraine would have said 10 years ago if you asked them what their economic outlook would have been for the next 10 years? Weird things can happen.

[Jaygo]

^^^ rational optimism is a necessity in life. Personal risk is based on who you are, The example of the Eastern Europe is good but also flawed. A rational optimist would look at history and say life is improving but we are on the boundaries of regional conflicts that dates to the middle ages. I may just keep a little bolt hole in the west.

 

I feel as a NA person the future lies here. No regional conflicts in its history, the War of independence, civil war and Indian wars are not blood feuds scorched into the psyche) We have large defensible borders with so much abundance there is very little reason to fight regionally. So the rational optimist would keep his investments here with a bolt hole to Patagonia in case of the big one.

[SafetyinNumbers]

27 minutes ago, Jaygo said:

 

 

You guys on this forum have been discussing Fairfax and the index inclusion for how long? 3 months ago I think @SafetyinNumbers mentioned it. @Viking has been by our side, holding our hands and saying Jaygo its cheap, its going to be ok. 

 

 

 

I think I mentioned it when @kodiak and I were on The Business Brew podcast in July 2023.

[Jaygo]

14 minutes ago, SafetyinNumbers said:

I think I mentioned it when @kodiak and I were on The Business Brew podcast in July 2023.

Yes that's right. I would say at that time you anticipated it but with lower odds. When a few months ago you were talking about it with much better idea of the inevitability with Algonquin falling and FFH growing so rapidly, that was the correct time to add leverage. Bet on the horse that's winning the race already, as long as he doesn't fall its money good.

 

My point is that many on this board have been telegraphing a likely scenario that has more or less come to fruition, not based on hopes and dreams like many of my BS picks but based on rational expected outcomes. Outcomes that one could place a little leverage on and still sleep soundly.

[Viking]

2 hours ago, Castanza said:

What you're seeing is the results of societal (US) individual spending addiction problem exacerbated by inflation. I would believe it is difficult to accumulate assets if I didn't see so many 20 something year olds with $3k mortgage payments, $1k car payments, 80k in student debt with 5k yearly vacation budgets all on combined incomes of less than 150k.

 

But I don't think it is only this because my wife and I did this. Neither of us had college paid for. I had 30k of debt after 2 years of college, took two years off, continued worked fulltime (UPS 40kyr 1 - 80k yr 4) 10-12 hour days and finished school my last two at night (it SUCKED). My wife worked as a nurse and had 40k in student loans made probably 60k up to 75k. She graduated in 2015 I graduated officially in 2017. We rented a shitty apartment for $840 in South Western Ohio, continued to drive our High School beaters and I paid cash for my additional schooling something like ~740 a month. By 2019 we had no student loans, one new vehicle and a new (used vehicle which I still have and drive). Maxed Roth IRAs and something like 10% funded 401ks for each of the respective years. We managed to do some trips (explore some national parks in a van out west, Canada, etc.) Fast forward we continued heavily saving and are in our early 30's with new locations, new jobs, a paid off house (cashflow choice), a rental property, multiple vacations (Rivera Maya, Punta Cana, Canada, Western US), two used vehicles paid off (50k miles and 100k miles), 1 child and roughly 4x the recommended retirement savings by age (big thanks to this forum). Right now we save roughly 55% of our income and my wife has reduced her work to about 1/3rd to raise our child. I have never used significant leverage to accomplish any of this. I've made some poor investments, squandered time in the market and had a few good investments. But the majority of our "success" if you can call it, that was just saving and being frugal/rolling with the punches of life.

 

Stuff has gotten more expensive....but peoples spending habits have barely changed. Drive a beater, rent a shitty apartment, shop at Goodwill, buy used furniture, reduce your monthly subscriptions, eat out less often and give yourself a weekly splurge....Do this for 5 years....just 5 and it will make a world of difference. Focus on saving and paying off student loans. Sometimes you have to do things you don't want to and make decisions with a long-term focus. Be thankful for opportunities and live life. Too many pessimists out there.

 

_______________________________________________________________________________

 

Now Canada? I'm not sure....seems like things are further out of whack North of the border. Especially regarding rent and housing. The 30 year fixed rate mortgage we have here in the US is an asset like none other. 

 

@Jaygo Appreciate the story of your late Father. Similar threads with my Dad. How do you think he would view todays younger generation and their spending/saving habits? 

@Castanza , that was one of my favourite posts of the year. It resonated so much because it was a very similar playbook to what me and my wife did to build our grub stake when we were young. I was trying to explain this to my son the other day - that we would likely be able to do the same thing today (he was talking about how ‘tough’ it is for some of his young friends today).

[SafetyinNumbers]

10 minutes ago, Viking said:

@Castanza , that was one of my favourite posts of the year. It resonated so much because it was a very similar playbook to what me and my wife did to build our grub stake when we were young. I was trying to explain this to my son the other day - that we would likely be able to do the same thing today (he was talking about how ‘tough’ it is for some of his young friends today).

Most people are focused on what things money can buy them instead of the freedom money gives them. I don’t know if that’s a personal choice or if people are born one way or the other.

[Mystery Guest]

9 hours ago, Jaygo said:

Dumb is dumb though. The above situation is plainly dumb. If a not so brilliant but hard working guy wants to borrow from his future wages to take a 5K trip he's in trouble. If he borrows from his future wages to buy into the NA economy I feel that's a wise decision at this stage. I did mine without debt until my first mortgage but had I layered on some debt to invest in the markets and stuck it out I could be much further ahead.

 

I started this journey a few years ago via a Smith Manouver and its frankly the biggest Bonanza I could have hoped for. Luck and this forum have been on my side. Tax breaks on interest, low taxes on dividends and 108% return thus far. It beats real estate and it beats lump sums on an RRSP.

 

You guys on this forum have been discussing Fairfax and the index inclusion for how long? 3 months ago I think @SafetyinNumbers mentioned it. @Viking has been by our side, holding our hands and saying Jaygo its cheap, its going to be ok. 

 

Buying more Fairfax a few months ago was a calculated risk. Not too much downside with far higher odds of upside. A largely bright future discounting any cataclysms. So I doubled down and borrowed more to buy it. I dont see that as inherently risky. I see it as taking next years earnings today tax free. Buying into a high odds probability and waiting a few months to let that play out. If FFH goes to zero I will have wasted 1 year of my working life to pay that back (less after tax) If FFH doubles I will have gained one year of working life (more after tax) 

 

Please explain @Parsad how that is not a good bet at this stage of my life? Also just to make everyone comfortable I am in no way putting a potential loss on anyone. I'm a big boy who makes his own decisions.

 

 

Bravo this philosophy will serve you well in life !  I work in an industry with low renumeration.  for many years I followed your perscribed path.  I have used the Smith Maneuver as you have described ... and been building a portfolio for years. Fairfax has been a core holding for 20 years. like you, i perceive risk differently, risk only exists where you  are not doing the math and worst case plan.(margin of safety)  Today I.  showed the wife the accounts, she said "that's too much, more than we need" not actually huge, but enough that retirement is covered for all possibilities with a wide margin of safety.  What i am saying is have this frugal and analytical bent is more important than picking the right horse . The highest risk is not having a big picture plan. 

 

 

 

Edited Saturday at 12:59 AM by Mystery Guest

[villainx]

10 hours ago, Jaygo said:

Buying more Fairfax a few months ago was a calculated risk. Not too much downside with far higher odds of upside. A largely bright future discounting any cataclysms. So I doubled down and borrowed more to buy it. I dont see that as inherently risky. I see it as taking next years earnings today tax free. Buying into a high odds probability and waiting a few months to let that play out. If FFH goes to zero I will have wasted 1 year of my working life to pay that back (less after tax) If FFH doubles I will have gained one year of working life (more after tax) 

 

Please explain @Parsad how that is not a good bet at this stage of my life? Also just to make everyone comfortable I am in no way putting a potential loss on anyone. I'm a big boy who makes his own decisions.

 

When you are young(ish) it's worthwhile to take chances!  Especially when good outcome severely outweighs downside.  

 

Erm... only caution would be to not discount luck?  Especially when good fortune shines using increased risk.  Lucky that the investment worked, at the right timing, while your own health and life also allowed the debt to remain manageable.  Not saying you, but some folks underestimate luck in a successful more levered situation.  And think same playbook will work again and again.  When it may not.  

 

Hope you don't mind a reminder for caution.  

 

 

[Parsad]

16 hours ago, Jaygo said:

 

I think you may be underestimating how difficult it is to gather assets for young people today. I see it in my employees who are basically spending every cent they earn just to pay for gas, insurance, rent etc. Maybe the smart ones can save enough to max their TFSA

 

In the past 4 years we have had a 40 % increase in the money supply on about 10% economic growth. That is a 30% devaluation imo.

 

Lets say 4 years ago one of these guys borrowed 100K or 2 years of pre tax income. They buy the XIU or VOO or whatever.

 

They would receive a decent tax refund for the interest expense of about 2000 a year,  they would be up to about 150k portfolio value and would be getting about 5k in yearly dividends.

 

The interest would be about 6k per year or 24K in total. Roughly equal to the tax savings and dividends. 

 

I think we, Parsad you in your 50's and me in my late 30's are a little blind to how out of hand things have become. My first house was 300k that same house just sold for 1.4M 3 months ago. (Not by me sadly) 

 

 

 

 

 

Frankly, I don't think there has ever been a better time to make money as a young person.  While the guarantees and comfort of a gold pension are a thing of the past, the speed and flexibility with which a young person can start a business and exploit global markets is unprecedented.  Combine that with cheaper alternatives to investing like ETF's, tax-sheltered options for investing and the fact that husbands and wives are both working and have access to similar jobs with closer to equal pay...it's a great time to build a comfortable life!

 

When my grandpa came to this country in 1964, he bought a house for $13,500 CDN.  It was sold in 1991 for $400K CDN.  In 2005, that same piece of land was worth $1.8M CDN.  Today, the property goes for $3.5M CDN.  That's just a fact of life in a city with three borders (2 natural - mountains, ocean; 1 man made - US border).  Land is limited to build on, so you build up and the value keeps going up.  

 

You can build the same online business in any city...you don't have to live in Vancouver, San Jose or New York.  The cost to build it out is the same.  The workforce can be outsourced.  

 

Every generation has it tough, and every generation slogs through it fine most of the time.  But the fundamental lessons of living below your means, don't lose money, don't aspire for material things, pay yourself first...those lessons are timeless!  Cheers!

[Castanza]

6 hours ago, Parsad said:

 

Frankly, I don't think there has ever been a better time to make money as a young person.  While the guarantees and comfort of a gold pension are a thing of the past, the speed and flexibility with which a young person can start a business and exploit global markets is unprecedented.  Combine that with cheaper alternatives to investing like ETF's, tax-sheltered options for investing and the fact that husbands and wives are both working and have access to similar jobs with closer to equal pay...it's a great time to build a comfortable life!

 

When my grandpa came to this country in 1964, he bought a house for $13,500 CDN.  It was sold in 1991 for $400K CDN.  In 2005, that same piece of land was worth $1.8M CDN.  Today, the property goes for $3.5M CDN.  That's just a fact of life in a city with three borders (2 natural - mountains, ocean; 1 man made - US border).  Land is limited to build on, so you build up and the value keeps going up.  

 

You can build the same online business in any city...you don't have to live in Vancouver, San Jose or New York.  The cost to build it out is the same.  The workforce can be outsourced.  

 

Every generation has it tough, and every generation slogs through it fine most of the time.  But the fundamental lessons of living below your means, don't lose money, don't aspire for material things, pay yourself first...those lessons are timeless!  Cheers!

100% agree, there is a lot of opportunities out there. I think a lot of the younger generation are still inflexible in what jobs they are willing to do. 
 

A friend of mine, went to school for civil engineering with the hopes of becoming an architect after grad school. Well an opportunity came up where a smallish excavating/engineering business popped up for sale in our home town. He took a gamble and bought the company and now clears north of 200k himself and has five or six employees that he pays very good wages. He grew the company and does work all over the state and is looking to expand outside of the state. 
 

Another guy I know from Ohio ended his career as a Green Beret, worked as an accountant for a few years, hated it. Saw a market he could address with some of the clients he worked with and started a contracting business that installs commercial things that get overlooked by typical companies (fire extinguishers, bathroom partitions, and all kinds of random stuff). He’s grown like crazy in the last 5 years and gets contracts all over the State. Pretty much just manages the business and has crews that now do the heavy lifting. 

The trades are wide open for ambitious people to build companies or replace the aging workforce. Lots of knowledge being lost out there the next 10 years. 
 

Another guy I know does commercial door installation. Has one other employee and makes out like a bandits. Busy and working long days right now, but has tons of work and is looking to expand. 
 

A friend who was a teacher started a company on the side making freeze dried candy in his basement as he saw his students in love with it. Fast forward 2 years and he has a warehouse, 10 employees with insurance and multiple state distribution. Working on EU distribution right now. All from a hunch and a hobby. 

 

I work full time from home for a German company. Live in a lower cost of living area. If I lose my job I imagine I could find another wfh position at another company doing roughly the same thing. WFH has drastically changed the market landscape imo. You don’t need to be in HCOL markets to get “good” jobs.