Messed up

Welcome to October. Iran fired a bevy of ballistic missiles at Israel, which just invaded Lebanon. Oil prices jumped 5% in response, rekindling fears of inflation.

In the States, new data showed job vacancies increasing, giving evidence the economy is cooling and interest rates will keep fading to rescue it. On the weekend Trump called for unfettered police violence while saying Harris is mentally deranged. And tonight the veep candidates duke it out.

Two million people in the States have no power, gas, food or cell service after an historic hurricane which killed a hundred. Maybe a few hundred more – they’re still missing. On Friday we get the latest jobs stats, suggesting whether the States is chilling or crumbling.

There’s still a hot, brutal war in Ukraine amid reports about 100,000 soldiers on both sides have died. And Gaza remains a disease-pone humanitarian disaster zone.

Amid all of this, stock markets have dipped modestly after hitting a string of record highs. In fact for the year to date, the S&P is ahead 20%, the Dow has advanced 11% and Bay Street has added almost 15%. This is a year in which REITs have gained about 10%, preferred shares are ahead 15% and bonds are feasting on lower yields and retreating central banks.

A B&D portfolio is up by double digits, despite weather bombs, real bombs, wars, record volatility and a convicted felon, sex abuser and election denier being a few whiskers away from the Oval Office. We’ve been through an inflation storm, a 23-year high for interest rates and inhabit a society in which average people can’t afford average hones. Governments are unpopular. Conspiracy theories and outright lies (‘they’re eating the dogs…’) are everywhere. Institutions – bureaucracy, universities, organized religion, unions, mainstream media, international bodies, central banks – are disrespected and crapped on daily in social media.

A burn-it-all-down and none-of-the-above movement is spreading into political life. It explains the shift to rightist parties, Trump, the hate on immigrants and the growing, ironic affection for socialism and disdain for capitalism and corporations among the young.

So much is messed up. In flux. It seems certain significant change is coming as disaffected people lurch from one demagogue to another looking for magic bullets. Because they don’t exist, more change will follow. The rest of this decade could be a corker.

What to do?

Be balanced with investments in growthy assets as well as more stable ones. Be diversified across all sectors of the economy, without gambling on a few stocks. Keep liquidity high and expenses low by investing through ETFs. Be globally exposed, keeping home country bias in check and never betting against America. Remember that growth is the norm, contractions are (like me) rare and short and the world still runs on oil and US currency. So keep about a fifth of your invested wealth denominated in greenbacks.

Here are some suggestions on how to weight an ETF-based, B&D portfolio.

Cash
2%

.

Bonds
25%
(in discount, floating rate and aggregate funds)

.

Preferred shares
13%
(two funds, one active, one index)

.

Canadian equities
17%
(index and dividend funds)

.

REITs
5%
(one index fund)

.

US equities
20%
(in six funds, four US$)

.

International equities
18%
(six ETFs, four US$)

.

In total, about 22 funds – enough to diversify a portfolio of millions. Obviously with a modest sum to invest, you don’t need as many. Also take care to move assets around for tax-efficiency between RRSP, TFSA and non-registered accounts. While you can largely set-and-forget, it makes sense to rebalance at least annually. Do the opposite of what your gut tells you – selling off some of the winners and buying the losers because, well, next year it could all be changed.

The world will stay weird. But you can thrive in it. And always remember: if people throw hate in the comments section, you’re probably winning.

About the picture: “Hello from Strathroy!” writes Brynle. “Here is a picture of our 3 year old Golden Retriever named Mayer, after the artist John Mayer. He is a bundle of joy and personality, and a perfect companion. His favourite thing in the world is playing fetch, an effective activity to take my mind off of reading all the optimistic perspectives found in your comment section. Thanks for your daily wisdom, have been a devoted reader now for 3 years. My wife and I fit the unfortunate cohort of house horny millennials and discovered your blog just shortly after purchasing our first home in 2021… at least we have Mayer!!”

To be in touch or send a picture of your beast, email to ‘garth@garth.ca’.

Source: https://www.greaterfool.ca/2024/10/01/messed-up/