Weekend Reading – moving from investing TINA to TARA
Hey fine readers!
Welcome to a new Weekend Reading edition: moving from investing TINA to TARA.
I’ll explain soon!
First up, a few recent articles in case you missed them!
Weekend Reading – moving from investing TINA to TARA
I think we are.
TINA is short for: There Is No Alternative.
That was the main thinking and mindset coming out of the Great Financial Crisis (GFC) of 2008-2009. The GFC brought down most stocks to a level such that there is no alternative to gain returns from – beyond common stocks.
But you have to wonder if slowly, eventually, bonds and other assets might may make sense again.
Which brings us to TARA: There Are Reasonable Alternatives.
This post on Financial Independence Hub (thanks Jon Chevreau) covers that topic in detail. I’ll let you read it and come to your own conclusion.
On a similar theme, A Wealth of Common Sense wrote about what a stock market bottom might look like. Ben offers some simple financial wisdom for all of us:
“You could try to use the economy as a tell for the stock market but good luck with that.
This is going to sound dumb but the best indicator that lets you know when a bear market is over is price.
The bear market will be over when stock prices start moving higher.”
So, is now the time to change your investing plan? Cashflows & Portfolios has a small quiz for you to take to arrive at that answer.
The Dividend Guy has a passionate review about Enbridge stock. Easy to see why: this company is responsible for about 25% of crude oil and 22% of all-natural gas transportation in North America.
Beyond ENB, a more complete listing of dividend stocks that rock can be found via my deep lifetime discount with Dividend Stocks Rock (DSR). Head on over to the top of my Deals page and to save a whopping 33% on your DSR subscription – making sure you only own dependable dividend growers and performers during any market cycle.
This Globe and Mail article caught my eye: why am I paying an adviser to manage my dividend portfolio?
From the article (subscribers only):
“My husband was a big fan of your columns, and by following your buy-and-hold approach he did very well for us. After I received a $3-million inheritance seven years ago, he invested the money in dividend growth stocks – primarily banks, utilities, telecoms and pipelines – and the portfolio’s value has grown to more than $6-million. Sadly, my husband passed away recently. Also, the adviser my husband was using retired, and the new adviser has dramatically increased the fees to about $30,000 annually (0.5 per cent of the assets), up from $6,000.”
Lots of factors to consider here but I wouldn’t. Hopefully my wife wouldn’t either!
Dale Roberts also had some commentary on this post in his recent Sunday Reads.
In some new reading material, Dale highlighted the markets might be ready for a interest rate pause. I don’t think that’s coming near-term but I would agree we are likely headed towards a major market cycle of elevated inflation and financial repression.
TINA to TARA is happening in real time…
Dale highlights this article which has some predictions I’m banking on in my portfolio:
- “We are experiencing a fundamental shift in the inner workings of most Western economies.”
- “My structural argument is that the power to control the creation of money has moved from central banks to governments. By issuing state guarantees on bank credit during the Covid crisis, governments have effectively taken over the levers to control the creation of money.”
Well, see what’s happening right now, in real time, with Emera and the Nova Scotia government:
Emera is pausing the Atlantic Loop in the wake of power rate cap legislation
- “By telling banks how and where to grant guaranteed loans, governments can direct investment where they want it to, be it energy, projects aimed at reducing inequality, or general investments to combat climate change. By guiding the growth of credit and therefore the growth of money, they can control the nominal growth of the economy.”
In will be painful near term, but….
- “Savers won’t like it, but debtors and young people will. People’s wages will rise. Financial repression moves wealth from savers to debtors, and from old to young people. It will allow a lot of investment directed into things that people care about. Just imagine what will happen when we decide to break free from our one-sided addiction of having pretty much everything we consume produced in China. This will mean a huge homeshoring or friendshoring boom, capital investment on a massive scale into the reindustrialisation of our own economies.”
So, where is it going to end up for us in Canada and the U.S.?
- “We saw the endgame before, and that was the stagflation of the 1970s, when we had high inflation in combination with high unemployment.”
So, how to invest?
- “First of all: avoid government bonds. Investors in government debt are the ones who will be robbed slowly. Within equities, there are sectors that will do very well. The great problems we have – energy, climate change, defence, inequality, our dependence on production from China – will all be solved by massive investment. This capex boom could last for a long time.”
Well worth the read…
Curious about how other DIY investors are investing in this market climate? Read on with Tawcan.
Congrats Toronto – you win! Toronto is officially the bubbliest housing market in the world.
Love that site. Source: Visual Capitalist.
Reader Question of the Week (adapted slightly for the site):
Thanks for your time!
Thanks for your readership and questions. Happy to help.
Image for post and content within it with permission from TaxTips.ca.
In simple terms, the dividend tax credit is for tax integration. When it comes to owning Canadian dividend paying stocks in a taxable account, or a low-cost ETF that holds many Canadian dividend paying stocks (e.g., XIU), you’ll essentially pay lower taxation on such dividend income – to a point – based on your own income.
Investors who hold Canadian dividend paying stocks, in a taxable account, get to offset the taxes already paid by the company in their non-registered accounts. (CRA basically subsidizes dividend investors for the tax the corporation already paid on dividends – that’s really why Canadian dividends for everyday investors like you and me are tax efficient).
Really though, I wouldn’t worry about investing in anything in your taxable account at all unless your TFSA and RRSP are full. Meaning, why pay tax on your investments when you can invest long-term tax-free (=TFSA) or in a tax-deferred account (=RRSP) if you don’t have to?
Only when TFSAs or RRSPs are full, go for taxable investing:
Thanks for your readership!
Thought of the week:
Annie Duke on quitting…
“A common misconception about quitting is that it will slow your progress or stop it altogether. But it is the reverse that is actually true. If you stick to a path that is no longer worth pursuing, whether it’s a relationship that isn’t going well, or a stock that you’re invested in that’s losing money, or an employee that you’ve hired who isn’t performing, that is when you lose ground. By not quitting, you are missing out on the opportunity to switch to something that will create more progress toward your goals. Anytime you stay mired in a losing endeavor, that is when you are slowing your progress. Anytime you stick to something when there are better opportunities out there, that is when you are slowing your progress. Contrary to popular belief, quitting will get you to where you want to go faster.”
Check out more from Annie at one of my favourite podcasts – The Knowledge Project.
Have a great weekend!