Be prepared

Big week. Trump and Xi meet at the G20 and talk trade. The tariff war between the US and China is the main thing on Mr. Market’s mind these days. It’s also weighing on everything else, from interest rates to corporate profits, jobs and the 2020 presidential slugfest.

Will the two heavies agree to back off? Start negotiations again? If so, investors might power equity markets to new highs by Friday. If not, stocks will sell off and we’ll get a rate cut next month. If your portfolio’s properly balanced, just ignore this stuff.

There’s more. Iran could get a lot uglier. New sanctions hit that country Monday. Boris Johnson’s sleazy girlfriend woes might keep him out of 10 Downing and mess up Brexit. Again. In the land of beavers & moose the Doug Ford government’s in crisis, the T2 Libs are 122 days from the fight of their lives and the Greens might actually outrun the Dippers. Amazing.

Of course, most people just care about themselves, which is what you’d expect. Trade wars, ideologies and monetary policy are less important to the biggest block of voters (Millennials) than the issues they’ll be voting on. Those would be housing, climate change and authenticity. Not sure how young Andrew Scheer is going to score there.

So, in conclusion, we have absolutely no idea what’s going to happen on any front. The best possible strategy, then, is to be aggressively conservative and stay out of trouble. No crypto. No gold. No weed stocks. No junior oils. Stick with diversified, low-cost, liquid ETFs, a 60/40 balanced portfolio and roughly equal dollops of maple, MAGA and offshore.

Despite the chatter, a recession is not a foregone conclusion. The two biggest forces in the world right now – the Fed and Trump – don’t want one. Those pantywaist advisors who have been sitting in cash for two years, muttering ‘things are too expensive’, have a lot to explain to their clients. There’s no way the US president – who takes the stock market as a proxy for his magnificence – is purposefully blowing this. This week may make that obvious.

Meanwhile, moisters, some good news. We’re just days away from the first drop in the stress test rate, as five-year mortgage rates come tumbling down below 3% almost everywhere. Given the above, this could be a rare window to load up on cheap money. Seriously consider a locked-in, half-decade long loan instead of rolling the dice and borrowing with a variable rate.

This week more banks are expected to follow the lead of the TD and CIBC and advertise five-year mortgages at under 3%. Last week those two lenders formally lopped off about a third of a point, although they’ve been quietly offering borrowers cheaper money for weeks. (Go ahead and ask the TD for a fiver at 2.8%, for example.)

Of course, there are better deals around. HSBC continues to offer its predatory 2.59% and online mortgage brokers representing outfits you never heard of are even cheaper. But the Big Banks at sub-3% move us closer to the stress test rate dropping from 5.34% to something closer to 5%. That will make it slightly easier for house-lusty kids to complete their descent into debt slavery and helpless middle age.

And on that note, here’s Dan. Yes, another 30something, but one who has learned valuable lessons about money, time, freedom – and what matters. World leaders, momentous events, tectonic political shifts and economic cycles all come and go. Meanwhile you have but one, brief life to live. Never surrender control of it, meander into debt nor be pushed into an action because ‘everybody else’ is doing it. Think Boy Scout. Be prepared.

“I’ve been reading your blog since 2010, and it’s been a guide through many of my life decisions since then.  I moved to Calgary in 2010, finished a masters in 2014, and generally saw increases in my income and net worth the entire time.  For one year, and one year only, I even joined the 1% in regards to income.  Then everything changed…

“Through that time I watched my friends buy first and even second houses, finance fancy cars and trucks with balls (it is Calgary), and spend every cent they made on niceties like vacations, clothes, and sometimes even dogs.

“In October of 2015 I lost my job, and my fiancé in the span of two weeks.  With layoffs everywhere I used the funds I had saved renting and my full TFSA to disappear to SE Asia for 6 months, I came back much healthier mentally.  You’re right when you say time, and how you spend it, is priceless!  Because I didn’t own and had saved/invested, I wasn’t yet worried about money after I returned to Canada.

“Then the unthinkable became reality, the months ticked by, hundreds of job applications went out, and a very few job interviews happened, yet nobody would hire me.  I wasn’t even being picky, from oil and gas, to municipalities in other provinces, to Superstore down the block.  In the meantime I met my wife who needed to be sponsored and couldn’t work until the immigration approved it.  Needless to say the RRSPs floated us until today.  30 months later, odd jobs where I could find them, and sponsoring a wife, I was just hired by Suncor with a solid 6 figure income.

“People may be slamming you on your blog, but I credit you for great and free advice that got me through this tough time.  I had choices others didn’t have because I read and followed.  I still don’t own and a bank wouldn’t touch me, but I take you at face value when you say ‘consider buying but be smart about it’.

“So Garth, thank you!  I don’t know what would have had happened if I didn’t find your blog on a snowy day 9 years ago…”