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Tuesday, January 16, 2018

Time to Rebalance Your Portfolio

The stock markets in the USA are hitting new records again. It means your stocks, ETFs, Equity Mutual Funds are probably at all time highs as well.

You probably have a desired portfolio allocation for stocks, bonds, international stocks, cash, etc. Check your holdings and you will likely find you are over-weighted in stocks because of the market's performance.

So now is a good time to rebalance your portfolio if your allocation is out of balance by more than a few percent. Sell some of those winning domestic equity holdings, buy bonds or international stocks or whatever you are underweight. This means "take some of your winnings off the table."

This technique of keeping a balanced portfolio is recommended by Warren Buffet, Vanguard, Fidelity, and most other respected investment authorities.

Disclaimer: this is not professional investment advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Saturday, January 6, 2018

Watch Out for Inflation

A few of us remember the 70's and 80's when inflation was around 10%.  When I started work, I was disappointed if I did not get a raise of 15 to 20% and I expected my rent to go up about 10% per year.  President Nixon was so worried about inflation that he passed wage and price controls, and he was a Republican.

USA Inflation % per year


For the last 20 years, inflation has been low.  Drastic increases in interest rates by the Fed (Volker) slowed inflation.  Then, productivity increases due to technology (Internet, wireless, computers..), globalization, and other factors have kept wage and price inflation under control.

Right now we see a perfect storm:
  • low unemployment in the USA and many other countries
  • economic growth in the USA and globally
  • fiscal stimulus in the USA from tax cuts and debt increases
  • employers unable to get workers in the USA, immigration being reduced
  • plenty of money in the financial system due to past stimulus, quantitative easing
  • endless war in Afghanistan and Iraq
This should cause an increase in inflation, but so far we don't see it.  No one seems to know why based on my reading of financial media and listening to Bloomberg.  Every "expert" says something like "I can't explain why inflation is low but I think .."

My opinion is that we will get much higher inflation starting in a year or two, perhaps sooner.  There are too many factors that will drive up wages and then prices.

Disclaimer: this is not professional investment advice and should be used at your own risk. The author is not a licensed financial advisor. You should not believe everything on the Internet including this blog and should check multiple sources possibly including a professional financial advisor before making decisions.

Wednesday, January 3, 2018

BIG Warm Canadian Winter Coats

My wife just talked me into buying a new winter coat, a warm one.  It cost a fortune and I get heat prostration if I wear it inside or in the car, it is very warm.  The "snorkel hood" is so big I look like an elephant with a trunk if I deploy it.

Canadians seem to really be into big warm winter coats, think "Canada Goose" or similar.  You see them everywhere.  If you wanted to organize a walk to the North Pole, you could round up random people on Ste Catherine Street in Montreal and they would all be fully equipped for the expedition.  Even teenagers wear these Michelin Man coats.


Back in the day (60's and 70's), no one would be seen dead with such a big warm coat.  At our high school, you could identify students by their winter wear when it was -20 Celcius:

  1. The "Cool Kids" - they would have a jean jacket with a short sleeve T shirt underneath, ripped jeans, and adidas sneakers.
  2. The "Regular Kids" - jean jacket with sweater underneath or stylish lightweight ski jacket, jeans, and boots.
  3. The "Uncool kids" - random winter jacket, corduroy trousers for warmth, and overshoe boots over unstylish shoes.  Usually accented with a ridiculous winter hat with a huge pom-pom on top.

I fondly remember going skiing in -40C wind chill weather and wanting to attract girls so I wore a sweater, nylon jacket, tight ski pants, stylish hat and gloves, and I got frostbite and no girl took a second look.  If anything had happened, they would have admired my hidden red long underwear I am sure.

But now I am old and under new management, so it is a super warm super thick super duper jacket for me.