Issue #26 - S&P 500 up 18% YTD and be wary of socialist ideals as they turn into a house of cards

Read time: 3 minutes

Hey friends! I've been in Venezuela for a week and a half and it always surpasses expectations. Family time here is a real treat, doing my best to keep up with the Venezuelan slang, incredible beach going here and overall a great trip so far. 

This country is rich with culture and beautiful people. Did you know that there is no such thing as racism here? You are what you are and you are embraced for it. If you’re white, you’re white. Black, you’re black. Skinny, fat or handicapped, that’s it man. Shouts of “vente flaco, oye negro, mira gorda” are common and it’s refreshing.

It is also blessed with the most natural resources in the world. Sadly, however, 90-95% of this country is in poverty. Poor economics due to politics gone awry have left the economic engine totally destroyed and the middle class robbed of their wealth. 

Buildings that began construction 20 years ago are still incomplete cement shells. There are no cranes to be seen except those that build the $10,000,000 mansions of the so called “enchufados” (those “plugged-in” to the government money siphoning machine).

This is purely as result of socialist ideals that turned a rich country into a communist dictatorship. Be warned, folks, while nice in the theory, taking from those who have and giving to those who don’t, simply does not work.

When the music stops, the system explodes like a house of cards.

Anyway, I’m droning on. Will save more for a future Journal.

PS - in case anyone didn't see the greeting my two ladies gave me last week, I link it again here. 

1. Personal Finance

If you get a lump some of money - inheritance, gift, bonus, etc - what should you do first?

Buy a new Range Rover of course!

Lol. Just kidding.

Obviously, it depends. But a good order of operations could loosely follow this path:

1. Pay off all high interest debt, starting with the highest interest rate first. Debt is crippling, and it will spiral out of control if you don't kill it first.
2. Set some aside some money for a emergency fund or rainy day. Usually 3-6 months living (necessities) expenses ie mortgage/rent, food, bills. You can invest this emergency fund in high interest accounts at your bank or better through your own brokerage account. One ETF to consider is $HISA - it pays ~5% yield, is secure, and is liquid daily - meaning you can spend it quickly if needed.
3. Start building your investment portfolio, i.e. TFSA/RRSP/Non-registered. If you are young and this new money has at least a 5 year time horizon, stock market ETFs are your best bet. If you need the money in less than 2 years, avoid investing in equities as we all know they can be volatile in the short term. For example, if you are buying a home next year, don't put your down payment into stocks.

Of course you might have more complexities to consider, but start simple and go from there.

2. Stock Markets

Even amidst all the bad news in the world, the S&P500 is up 18% YTD.

And so the wealth gap gets bigger between those prioritizing investing every month vs those who don't.

Set up the automatic monthly contribution already and just put it on autopilot. 

Must be boring to keep hearing this. But guess what, investing should be boring.

3. Real Estate

A few highlights from RBC's latest housing report:

• High interest rates propelled ownership costs to new summit in the fourth quarter of 2023: A household earning a median income needed to spend a staggering 63.5% of it to cover the costs of owning an average home at market price. 
• Soaring interest costs more than offset a slight price relief nationwide: The monthly mortgage payment for the composite home (valued at $796,300) increased more than $125 (3.3%) last quarter to $3,990. This rise occurred despite the composite home price easing 0.5% q/q.
• Affordability worsened in all markets: Vancouver, Victoria and Toronto experienced the biggest deterioration, further exacerbating acute stress. The situation also became more challenging in Ottawa, Montreal and Halifax, where affordability is at, or near all-time worst levels.
• Anticipated Bank of Canada pivot brings hope for some respite: growing likelihood of rate cuts starting mid-year as a turning point for housing affordability in Canada.
  
  

1 Quote

If I were asked the difference between Socialism and Communism, I could only reply that the Socialist tries to lead us to disaster by foolish words and the Communist could try to drive us there by violent deeds.

- Winston Churchill

A Question

Have you ever made purchases or spent money to keep up with friends? Why?

I have. Keeping up with the Jones' is hard to avoid. But it inevitably happens. As I get older, I'm trying to aim for more bona-fide friendships based on love and camaraderie over substance and material waste.

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Thank you

Eddie Gudewill, CFA
 

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