May 112017
 

Investment Outlook

BlackRock, Inc. based in New York City, is the world’s largest asset manager with $5.4 trillion ($5,400,000,000,000) assets under management, which is even more than what Vanguard has. Due to its power and influence, BlackRock is often referred to as the world’s largest shadow bank. So when this company releases a report, investors tend to pay attention. ūüôā

Last month BlackRock published its Q2 2017 global outlook. Below are some highlights.

BlackRock prefers equities over fixed income in general. For the next 5 years, BlackRock believes global equities (except U.S.) and emerging market equities are the best asset classes to be in. When it comes to debt BlackRock suggests high yield bonds and emerging market debts are likely to outperform.
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However, high yield bonds can be risky for investors with shorter investment horizons. So BlackRock says it actually prefers medium to long term U.S. investment grade bonds.
BlackRock also likes emerging market and global equities. It also believes the U.S. financial sector can benefit from rising interest rates if the trend of monetary tightening continues in the U.S.
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You can download the full BlackRock report here.¬†ūüôā

How does this change my current plan? Not much. After seeing the second chart, I have decided to continue investing in high yield bonds since it’s one of the best performers in the model. The duration is also relatively short (around 5 years.) This lowers interest rate risk. The only fixed income asset that has a higher yield is Latin American government bonds. But I don’t like it due to tax reasons.¬†I can shelter U.S. investments in my RRSP thanks to NAFTA. But Brazilian investments in my portfolio will be subject to the full brunt of taxation. What about diversification though? I do want Latin American exposure. But that’s why I have equity of companies such as BNS conducting business there, instead of owning debt directly.

 

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Random Useless Fact:

This is how to annoy a gamer.

May 132015
 

Not in my Backyard 

I recently read an article about a lower mainland couple who doesn’t like how a¬†neighbouring $2 million house sits¬†empty all the time. The yard is unkempt, there are no cars in the driveway and the lack of human presence is “driving [the couple] slightly bananas.”

Sacr√© bleu! You mean to tell me that there are people who buy property only for investment purposes? How dare they offer above market price to purchase a house¬†here, so that Canadians can unlock¬†the full value of their real estate. What can we do with cash anyway? Buy a diversified portfolio of liquid assets like stocks and bonds to provide passive income for retirement? No thanks. I’d much rather put all my nest eggs into a single illiquid asset that produces no income, and lies on a major fault zone. ūüėõ Those pesky foreign investors who don’t even live here think they can just not contribute any waste to¬†our sewage system, and¬†not use the city’s garbage services, but somehow think they still have the right to pay the full brunt of utility tax and property tax. Some nerve! How dare those foreigners¬†help fund our police, fire, and public education system when they don’t even have kids here to overcrowd our¬†classrooms. It’s also unfortunate how¬†quiet their house is all the time. Who would want to¬†live beside¬†quiet neighbours anyway? Not me. ūüôĄ

Sarcasm aside, foreign ownership of real estate is a hot button issue around here. Should non-residents or non-citizens be allowed to purchase Canadian residential property?

There’s actually a petition to¬†restrict foreign investment in Canada’s most expensive real estate market, which I’ve signed and shared on social media. To be frank I don’t believe this petition will bring about any meaningful change, but I think it’s an important discussion for fellow Vancouverites to have. ūüôā

15-05-change-restrict-foreign-investment-real-estate

click on image to sign the petition

There will also be a rally outside the Vancouver Art Gallery on May 24th, to focus on the problem of affordable housing for young people in a city where the average house costs more than $1 million. Feel free to attend and take a stand if you believe in the cause. ūüôā

Foreign Real Estate Ownership

Some believe¬†foreign ownership drives up the cost of housing which makes it less affordable to live in the city. But I think that’s largely a myth. The amount of foreign owned property is just a fraction of the overall market. Foreign investment laws haven’t changed much in Canada over the last decade.¬†However¬†mortgage interest rates have been cut in half over the same period. Raise the interest rate and watch as prices¬†correct overnight.

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