Blog

Bubble

The Bubble Blowing Contest

  One element of Bullshift that I cannot help but notice is how the finance business has selective and self-serving definitions and explanations that abound when explaining the business to the public.  We’ve already discussed how a 10% move downward is called a “correction”, but there is no term for

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Thoughts on the 2021 Budget

Overstimulated

By now, you’re likely aware of the many sordid details found in the 2021 federal budget.  I’ve been following the discussions closely and I was glued to my TV set as the long-awaited details were finally released on Monday.  This is a brave new world.  I’m a bit excited and

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Sport game hockey

The John Tavares Principle

This is an homage to number 91 in your program, the captain of your Toronto Maple Leafs – John Tavares.  It’s about a quick and dirty calculation hack you might find useful then thinking about market gyrations.   Big moves and market volatility can be killers to your portfolio value.  Even

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Define “Inconsiderate”

For better or worse, I tend to be a stickler for semantics and exactitude.  As you might imagine, that usually means going through life with this mindset is “for worse”.  I dislike it when advertisers use the word “fast” instead of “quickly” even though, as I have grudgingly learned after

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Are People Denying the Real Estate Bubble, Too?

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.  

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Innocent by Association

Ever notice how there’s no counterpart to certain words?  For instance, have you ever met anyone who is “gruntled”?  The same might apply to phrases.   One phrase that I have heard often is “guilty by association”.  If that’s possible, shouldn’t it also be possible to be innocent by association?  I

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Belief Perseverance

According to Wikipedia, “Belief Perseverance” (also known as ‘conceptual conservatism’) involves maintaining a belief despite new information that firmly contradicts it.  Astonishingly, such firm beliefs may even be strengthened when others attempt to present evidence debunking them, a phenomenon known as the ‘backfire effect’.  We’ve all seen this playout south

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What About the Bond Market?

Over the past several months, much has been said about the stock market, and for good reason.  What can be lost in the shuffle is what has been going on concurrently in the bond market.  It’s at least as bad. Therefore, if you’re worried about stock valuations, you should probably

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How to Portray the Past 50 Weeks

On March 23, 2020, stock markets hit a bottom.  In places like Canada and the United States, they had just experienced a massive drop of about 1/3 in only 5 weeks.  Now that that experience is almost a full year behind us, we can look back on it to assess

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Unintended Consequences

Now that we’re into March, most of the world is coming up on the one-year anniversary of the start of a pandemic that almost none of us were prepared for.   Before it happened, the world was ‘normal’ – and very little of what has happened since would be described in

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What Are Your Prospects?

As we head into the dog days of winter, many people are feeling a sense of disconnectedness.  Many people have gone months without seeing their extended families and phone calls and zoom calls have replaced good old-fashioned face to face contact over the winter months.  There might even be a

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The Route Taken Matters

Last week, I had a lovely exchange with some friends on Twitter about advisor behaviour considering current market valuations.   Every time I write about this, I need to begin with the caveat: this is NOT about forecasting or market timing.  I can’t do it.  You can’t.  No one can do

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To Infinity – and Beyond!

With apologies to Buzz Lightyear, there seems to be a fair bit of cognitive dissonance in the world.  Over the years, advisors have collectively convinced their clients that it would be reasonable to expect high single digit returns on a fairly traditional (say 70% stocks; 30% bonds) portfolio.  I got

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How Rational is that Decision?

    Today marks the one year anniversary of my blog.  In celebration, I am announcing that it is now easier than ever to find and use it.  In addition to the usual way, you can also access it by visiting either: www.standuptobullshift.ca  or www.standuptobullshift.com *** Yogi Berra once quipped

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Stop Reassuring People with Stories

Almost everyone likes a good story.  That’s especially true about investment clients, and the financial advice industry has taken it upon itself to offer reassurance.  Too often, people who give advice to retail clients are so determined to keep those clients calm that they write and say things that they

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The Value of Advice

Over the past few years, there have been dozens of articles in magazines that are distributed to financial advisors about both the value and cost of financial advice.   Most are overly simplistic to the point of being inaccurate and downright misleading.  As you might imagine, any publication that caters to

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How Will you React to the 50% Incorrection?

Words are important.  Not only because of what they say, but also what they imply without saying.  The finance business is full of such words and phrases.  Today, we’ll look at one of my (ahem) “favourites” – the word “correction”.  Within the field of finance, a correction is when the

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What’s Truth Got to do with it?

Many of us know a few top-of-mind quotes because they are used so frequently and have nearly universal applications. We sometimes trot these quotes out in order to sound worldly, well-read and, at times, even a bit cynical.  The funny thing about personal finance is that many people recognize many

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Pascal’s Wager, a Vaccine and a Portfolio Hedge

  There’s an example from the history books that will help to illustrate the risk / return tradeoff between two alternatives that may or may not come to pass.  It’s called Pascal’s Wager.  In the 17th Century, a young French philosopher named Blaise Pascal suggested that a rational person should

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The First 100 Days of 2021

Happy New Year!  Later this month, Joe Biden will be sworn in as the next American President.  He has made an audacious promise to vaccinate 100 million Americans within the first 100 days of taking office.  It is an ambitious, optimistic and highly laudable objective.   One of the concerns

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Don’t Semmelweis Me

Some days, in my own small way, I feel as though I might get an inkling of what Ignaz Semmelweis must have felt.  Semmelweis was a physician who merely wanted what was best for his profession and endured a great deal of criticism for pointing out that the status quo

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A Proposal for Income Redistribution

One of the public policy issues I think about frequently is income inequality. It is becoming increasingly understood and accepted that this is a real problem that is contributing to societal unrest. Are there ways where we could change laws on the extreme ends of the income scale only? In

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If a Tree Falls in the Forest

We all know the existential question: if a tree falls in the forest and there’s no one there to hear it, does it make a sound?  While you contemplate how you might personally respond to such a query, here’s a follow up: if a stock market bubble gets bigger and

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Fear the GIC Refugee Renaissance

When I started in the business in September of 1993, it was a great time for new client acquisition.  The reason is simple: there were so many new clients to be had – in the form of first-time investors.  As interest rates plummeted from their all-time highs in the early

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The Great Reset

By now, you may have heard about “The Great Reset”, a theory (and book of the same name) promulgated by Klaus Schwab, Founder and Executive Chairman of the World Economic Forum (WEF).  It seems our Prime Minister has caused a bit of a stir on social media for musing out

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Cautiously Pessimistic

If I had a nickel for every time I heard someone say they were ‘cautiously optimistic’ about one thing or another, I’d be wealthy.  This got me to thinking – why do I never hear anyone say they’re ‘cautiously pessimistic’ when invited to prognosticate about the not so distant future?

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Why I Continue to Play Defence

At least I’m consistent.  For about a year now, I’ve been telling everyone who would listen that markets the world over are expensive to the point of being dangerous…. especially in the U.S.  The thing to remember is that even people like Professor Robert Shiller who win Nobel Prizes in

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No Progress Trumps Uncertainty

See what I did there?  I worked the word “Trumps” into the title in a blog about American politics.  Cute, huh?  For years, the prevailing wisdom has been that markets hate uncertainty.  Now, as I write this, it has been nearly 48 hours since polls closed in the U.S. and

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Bullshift Culprit 3: Resulting

In Annie Duke’s excellent book “Thinking in Bets”, she points out a simple, yet often-overlooked aspect of decision-making.  Too often, it seems, people gauge their decisions by the outcome they experience.  Good outcomes are deemed to be the result of good decisions and bad outcomes are deemed to be the

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Bullshift Culprit 2: TINA

Last time, we looked at how the Fear Of Missing Out (FOMO) might be contributing to markets being expensive.  That’s not the only plausible behavioural explanation for what’s going on in capital markets these days.  There’s another obvious candidate to explain sky-high valuations: the utter lack of a viable investment

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Bullshift Culprit 1: FOMO

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

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Do Not Say You Didn‘t See This Coming

At the beginning of the year, pretty much everyone was caught off guard when a global pandemic of unprecedented proportions in our lifetimes hit the world.  People were frightened.  Office, stores and restaurants were shuttered, markets tumbled and everyone was a bit out of sorts by the changes we were

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Modern Monetary Theory

For generations, undergraduates have been fed a steady diet of what might otherwise be called “traditional” economics – economic theory that is predicated on the plausible but largely unsubstantiated premise that people make rational decisions in their own economic self-interest.  That notion of economic self-interest, first championed by Adam Smith,

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Welcome to Autumn

People normally associate spring with rain; not autumn.  Metaphorically, however, it’s raining out there.  As the calendar moves into the official start of the autumn, markets on both sides of the border are facing the prospect of a correction – a drop of 10% or more from a previous peak. 

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Under-Promise and Over-Deliver

One phrase that has become so trite over the years as to be threadbare is the old chestnut that certain people and businesses aim to under-promise and over-deliver.  That sounds fine in theory.  Most people don’t even question the sentiment.  Here’s a way to test the sentiment in the investment

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Déjà Vu (all over again?)

Now that we have passed Labour Day and summer is over (at least unofficially), the time has come to get into new routines.  It’s back to school time.  Time to close the cottage, put away the golf clubs and hunker down on the big push to hit your yearend sales

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The Buffett Indicator

For pretty much all of 2020, I have been offering somber and cautious warnings about the dangers one implicitly accepts when investing in markets with valuations as high as they are currently.  I have been particularly concerned about the U.S. market as represented by the S&P 500 and by the

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Lower for Longer and the Implications for Public Policy

In the second half of August, the two countries that share the bulk of the North American continent independently signaled that they are shifting their economic courses and pursuing a public policy initiative which had been considered somewhat heretical until very recently.  We are now left to reflect upon what

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The Future of Financial Advice

One thing that many observers notice about financial services is that the evolutionary process is slow to change.  Glacially slow.  As a simple illustration, Ontario Securities Commission (OSC) Commissioner Glorianne Stromberg wrote a report in 1995 (!) where she clearly indicated that embedded commissions in mutual funds – both in

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Don’t Be Smug About Markets

Many American commentators are gleefully noting that the pandemic-induced bear market for the S&P 500 is now officially on record as the shortest bear market in history.  The stark reality of a pandemic-induced economic slowdown has been countered with a federal reserve-induced monetary stimulus the likes of which has never

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When the top 1% Advises Everyone Else

Like most Canadians, financial advisors exist all over the income spectrum.  The major difference is that a disproportionate number of them are highly successful.  That should come as no surprise.  Many would-be clients are comforted by this and some even seek out advisors who are conspicuously successful because obvious opulence

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The Shape of Things to Come

For nearly half a year now, pundits have been offering their viewpoints on what the Coronavirus means for both investors and the broader economy.  Many have taken to offering prognostications regarding the shape of the eventual recovery.  While I find these viewpoints amusing (my personal favourite is the “square root”

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Cost Matters – But Does Your Advisor Care?

Perhaps the most conspicuous disconnect in the financial services industry today revolves around cost.  It should be noted at the outset that the cost paid by a client comes in two forms – the cost of advice and the cost of products used to construct portfolios.  Both matter a great

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Advisor’s Alpha

One of the great debates around the investing world revolves around the extent (if any) to which advisors add value.  Many in the media say the number is either small or negative. Many advisor cheerleaders say the number is substantial.  Everyone should be skeptical.  What follows is my unscientific assessment

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Connecting Dots

The distinction between solid analysis and wonky forecasts can be tiny.  As a Portfolio Manager who has spent more than his fair share of time dealing with the media, I am highly mindful of the need for the fifth estate to look for controversy as clickbait.  As the saying goes,

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Advice Quicksand

I have a question for you.  How many people do you suppose end up getting worse financial results than they expected simply because they believed and followed an advisor who insisted they “could do better”?  For years, I’ve been speaking with my fellow advisors and getting the impression that many

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The Market and the Economy are not the same

We’re now into the last week of the first half of 2020 – and what a six months it has been!  The news for capital markets has been mixed, as markets have tumbled frighteningly and then rebounded smartly.  If one were to naively look at market levels at the start

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Have You Considered Retiring Later?

There are countless pieces of advice regarding retirement planning out there.  Some of them deal with lifestyle issues (How will you fill your day?  Are you sure your spouse shares your vision of how time in retirement will be spent?  What will you do to stay sharp now that you’re

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I Don’t Know Means I Don’t Know

For a generation now, the women’s movement has engaged in a worthwhile and important campaign regarding sexual consent called “No Means No”.  What I want to touch on today is considerably less noble, but still part of what I believe is a systemic societal problem.  It involves people who know

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Same Facts; Different Spin

Narratives have a funny way of taking on a life of their own.  In particular, there are some facts that are clear and undeniable, but those facts can be (and often are) interpreted in radically different ways.  Competing narratives can go a long way in explaining the psychological makeup of

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