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Retired and loving it

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  • Avoid These Canadian Banks [View article]
    This is a good article but it leaves out a couple of issues. The CMHC insurance will help to reduce losses in the event of a crisis but a more important issue is that Canada has a large influx of immigrants who have been the main buyers of real estate in Canada's largest cities, notably Vancouver and Toronto. These immigrants drive population growth in these two cities to the tune of 3% or more annually. These immigrants also tend to drive up Canada's birthrate once they are established. Total population growth in Canada's large cities is probably 4% or more annually. This should sustain housing prices in Toronto and Vancouver.

    In more rural areas it is indeed probable that house prices will collapse. For example it is not uncommon for house prices to be 6 to 8 times average gross salaries in small towns. The reason this happens is because retiring baby boomers from Canada's major cities are migrating to small towns to "cash in on their grossly overvalued homes in Toronto and Vancouver". These boomers have pushed up house prices in small towns to the point that no one who actually works in these towns can even remotely afford a home. It is in these small towns that house prices could fall 30%-40% when the bubble bursts.

    Let's do the math: The average urban single family home in Toronto or Vancouver is currently valued at about $1.2 million. The average home in a small town costs about $350,000. A 10% decline in the big city home amounts to $120,000. Deduct this directly from the $350,000 home in the small town and voila you have a 34% decline in value.

    It is real estate in small towns that is most at risk. But will there be loan losses? Possibly but since the value of small town homes has been driven up by retiring baby boomers leaving the big cities these folks do not have mortgages. The game is this: sell the big city home, take out $750,000 and buy a small home in Bugtussel. When the value of the Bugtussel home collapses nothing happens except the retiring baby boomer will feel a little less wealthy.
    Aug 28, 2015. 11:22 AM | 1 Like Like |Link to Comment
  • Should You Be Long Procter & Gamble? [View article]
    I hope that happens. For that to happen however management needs to change. Management are still obsessed with beating Kimberly Clark which surrendered more than 20 years ago. Management at PG is stuck in a 1960's mindset. The environment today is different. Growth is slow. Prices can't be raised. The products are already good enough. They need instead to focus on lowering costs. Kimberly has been doing this for 20 years. PG needs to trim its workforce by 2-3% every year. PG cannot get its mind around this and until they do they will continue to destroy value.
    Aug 25, 2015. 10:11 AM | Likes Like |Link to Comment
  • REIT conversion might not be the answer for McDonald's [View news story]
    Spinning MCD's corporate stores into a REIT would add no value to current MCD shareholders. All that would happen is that MCD's operating margin would be eroded by rent payments. The multiple paid on MCD's remaining earnings would be lower. The net result: zero gain.
    Aug 25, 2015. 09:59 AM | 6 Likes Like |Link to Comment
  • Exelon's Time Is Coming [View article]
    Interesting but not very helpful. Nuclear competes with Natural Gas. There is a surplus of Natural Gas as far as the eye can see. Exelon cannot earn its WACC while Natural Gas prices are below $5/mcf.
    Aug 20, 2015. 09:46 AM | 1 Like Like |Link to Comment
  • Something Is Still Ridiculously Wrong [View article]
    An excellent point. When a market is dominated by one single buyer it is difficult to know whether the current price of U.S. Treasuries is realistic. Personally I don't know many individuals who are slobbering and drooling over yields around 2%. The Fed though seems to like this yield level.
    Aug 13, 2015. 09:43 PM | Likes Like |Link to Comment
  • Something Is Still Ridiculously Wrong [View article]
    The aging baby boomers are responsible for the falling labor participation rate. There are simply not enough young people to offset the fact that the bulk of the workforce is approaching retirement age.

    The participation rate cannot pick up until baby boomers begin to die in volume. We are 20 years away from that point.
    Aug 13, 2015. 09:38 PM | Likes Like |Link to Comment
  • Something Is Still Ridiculously Wrong [View article]
    Banks are the last entities in the economy that should take risk. Their job is to make loans that can be repaid. That shipped sailed a long time ago and banks need to be reigned back to what they were 50 years ago. Boring and safe.
    Aug 13, 2015. 09:20 PM | 4 Likes Like |Link to Comment
  • Something Is Still Ridiculously Wrong [View article]
    Yes indeed.
    Aug 13, 2015. 09:18 PM | Likes Like |Link to Comment
  • Something Is Still Ridiculously Wrong [View article]
    Possibly. My guess is Chinese industrial production is heading south.
    Aug 13, 2015. 09:14 PM | 1 Like Like |Link to Comment
  • Something Is Still Ridiculously Wrong [View article]
    You need to finish this with the classic "you buy now pig dog"
    Aug 13, 2015. 09:11 PM | 16 Likes Like |Link to Comment
  • Tactical Asset Allocation - My Ideas From 30 Years Of Learning [View article]
    Begin by ignoring all the poly syllabics. Stats people love to analyze markets in the hope of finding patterns which replicate. It is the holy grail of all technical inclined investors. The truth the stock market mirrors the general psyche of all investors in the world. Your time would be better spent applying stats to dream analysis.
    Aug 13, 2015. 09:15 AM | Likes Like |Link to Comment
  • Tactical Asset Allocation - My Ideas From 30 Years Of Learning [View article]
    Good advice but good luck with that.
    Aug 13, 2015. 09:10 AM | Likes Like |Link to Comment
  • Tactical Asset Allocation - My Ideas From 30 Years Of Learning [View article]
    Good article and I note that you did not use the phrase "strategic asset allocation". This is a phrase that consultants and advisors dreamed up a couple of decades ago and is code for "we don't have a clue what's going to happen in the long term so just set your mix at 60:40 (equity vs. fixed income) and leave it there.

    There can be no worse advice. There is no such thing as "strategic asset allocation".
    Aug 12, 2015. 08:58 AM | Likes Like |Link to Comment
  • Is a Ukraine default next? [View news story]
    That could well be his strategy. Joining the EU is off the table so Putin can now sit back and wait.
    Jul 20, 2015. 10:37 AM | Likes Like |Link to Comment
  • Is a Ukraine default next? [View news story]
    Russia has had only one brief period of democracy in the last 500 years. Mostly it has been run either by a monarchy, a communist party or a dictator. What would Kruschev say about Putin? Would he liken him to Stalin?
    Jul 19, 2015. 06:06 PM | Likes Like |Link to Comment
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