There's no place like home!

[Slava]

Here is my latest post on whether investing in Canada could be prudent at this time: http://victorlough.com/blog/1893230-Theres-no-place-like-home-Is-it-time-to-invest-in-Canada

[Derek Sutton]

Here is my latest post on whether investing in Canada could be prudent at this time: http://victorlough.com/blog/1893230-Theres-no-place-like-home-Is-it-time-to-invest-in-Canada


We were advised to do just the opposite and a few of the reasons were.
-talk of an interest rate increase in the US early 2016
-Dow possibly hitting 20,000 in 2017 where as TSE has been trending down
-the TSE's dependency on energy stocks.
-A fancy graph going back 40? years showing Canadaian market performance vs International market, this showed that it seems to work as a 10-12 year cycle and 2014 was the beginning of the International market out preforming Canadian, and that this should be expected to continue for several years, based on historic trends.

Based on this info "our guy" advised to move new investment out of the Canadian market. What are your thoughts on this?

[Buzzcock]

Here is my latest post on whether investing in Canada could be prudent at this time: http://victorlough.com/blog/1893230-Theres-no-place-like-home-Is-it-time-to-invest-in-Canada

Ken Fisher also recently wrote an article forecasting next year's US market returns based on the election cycle. You can find it here (http://www.forbes.com/sites/kenfisher/2015/06/17/hillary-clinton-stock-market-bets/).

Interestingly, in an election year such as 2016, the US market typically performs well if a Republican is to be elected but underperforms with a Democrat win. This trend then reverses the following year. Fisher is betting against Hilary - and consequently he also expects a solid year in the US market next year.

It does beg the question though....if Fisher and yourself are correct and next year will be a great year for the US markets...am I better off just investing my money down south rather than at home?

[Slava]

Well it's hard for me to give specific advice of course, but generally speaking I have invested for myself and clients hard into the US over the past five years or so. I have also plugged a fair amount into Europe and been significantly under weight in Canada.

The thing is the international story won't last forever, and Canada won't be terrible forever either. It's impossible to predict with certainty the exact timing of things, and my point there wasn’t to do that. But while we have seen some trouble for Canada here, there are some sectors that will do well with a strengthening US dollar. Specifically exports and manufacturers should see a benefit. Even oil will see some benefit for their sales.

I don't put much credibility into looking at charts and finding patterns. I guess some guys make it work, but I just don't get it. By that I mean to say I understand what they’re looking for, and I know the theory, I'm just not convinced it's effective. That's not everyone's opinion though, and like I say some guys make it work.

[Slava]

Ken Fisher also recently wrote an article forecasting next year's US market returns based on the election cycle. You can find it here (http://www.forbes.com/sites/kenfisher/2015/06/17/hillary-clinton-stock-market-bets/).

Interestingly, in an election year such as 2016, the US market typically performs well if a Republican is to be elected but underperforms with a Democrat win. This trend then reverses the following year. Fisher is betting against Hilary - and consequently he also expects a solid year in the US market next year.

It does beg the question though....if Fisher and yourself are correct and next year will be a great year for the US markets...am I better off just investing my money down south rather than at home?

It depends on how you are investing in some sense. If you're buying single securities, or securities traded on a US exchange you pay about $1.33 at this point for the exchange. That can be daunting for quite a few people. There is a school of thought I have heard where people say the dollar is at a twelve year low, so it should go back towards parity. I don’t quite agree because I remember the dollar in the sixties (as in $0.60).

Like I say above, I can't tell you exactly how I would invest though. I don’t know you, and have no idea of your situation. If you want to contact me and have coffee or something though, we could talk further.

[GGG]

Ken Fisher also recently wrote an article forecasting next year's US market returns based on the election cycle. You can find it here (http://www.forbes.com/sites/kenfisher/2015/06/17/hillary-clinton-stock-market-bets/).

Interestingly, in an election year such as 2016, the US market typically performs well if a Republican is to be elected but underperforms with a Democrat win. This trend then reverses the following year. Fisher is betting against Hilary - and consequently he also expects a solid year in the US market next year.

It does beg the question though....if Fisher and yourself are correct and next year will be a great year for the US markets...am I better off just investing my money down south rather than at home?

There haven't been enough elections in the U.S. For this to be anywhere near statistically significant.

For example from 1978 to 1998 in every year but 1990 if the NFC team won the Super Bowl the Dow went up that year, if the AFC team won the market went down.

Correlation does not equal causation.

[Slava]

That's true enough, but the presidential cycle is a well known stock market indicator. We can also see that statistically the market performs much better when the democrats are in power. Of course it doesn’t mean it will always happen, and it's not rock solid, but you can see a long period of evidence there.

[Slava]

Here's the latest on the Canadian economy, which is somewhat related to what we were talking about last night http://www.financialpost.com/m/wp/blog.html?b=business.financialpost.com//news/economy/canadas-economy-pulls-out-of-recession-but-clouds-remain

[Buzzcock]

There haven't been enough elections in the U.S. For this to be anywhere near statistically significant.

For example from 1978 to 1998 in every year but 1990 if the NFC team won the Super Bowl the Dow went up that year, if the AFC team won the market went down.

Correlation does not equal causation.

I can't speak specifically to what's in the Fisher article I referenced but a more general correlation between election cycles and market performance is well known and is statistically significant. The first couple years of a term tend to underperform the latter two years. If you're worried about sample size this tends to be true not only in the US but also other western economies including Canada's.

So where's the causation between election cycle and market performance? It's believed to be due to market friendly policies being enacted as a re-election attempt approaches.

I'm not saying I buy into this and I certainly don't trade on this basis - just food for thought. Personally, I've been largely on the sidelines for over a year now as I struggle to understand the extended sluggish demand for primary materials with a continued bull run. That says bubble to me.

Having said that.....go NFC.

[Slava]

I can't speak specifically to what's in the Fisher article I referenced but a more general correlation between election cycles and market performance is well known and is statistically significant. The first couple years of a term tend to underperform the latter two years. If you're worried about sample size this tends to be true not only in the US but also other western economies including Canada's.

So where's the causation between election cycle and market performance? It's believed to be due to market friendly policies being enacted as a re-election attempt approaches.

I'm not saying I buy into this and I certainly don't trade on this basis - just food for thought. Personally, I've been largely on the sidelines for over a year now as I struggle to understand the extended sluggish demand for primary materials with a continued bull run. That says bubble to me.

Having said that.....go NFC.


The election correlation in Canada doesn't appear to be as a result of the Canadian government though, its the US cycles as well. I wrote about that in another post here, and on my blog as well. I think that was back in August or September partway into the election.

[OMG!WTF!]

I don't put much credibility into looking at charts and finding patterns. I guess some guys make it work, but I just don't get it. By that I mean to say I understand what they’re looking for, and I know the theory, I'm just not convinced it's effective. That's not everyone's opinion though, and like I say some guys make it work.

http://www.moneyscience.com/pg/bookmarks/Admin/read/456752/head-and-shoulders-above-the-rest-the-performance-of-institutional-portfolio-managers-who-use-technical-analysis

Most large investment companies use technical analysis because it does provide better returns than fundamental. Less work too.

[Slava]

Yeah I'm definitely familiar with it and have gone through various course work for it in the CFP and CFA aside from my own reading. I guess all I can say is that while things like the put/call ratio and relative strength indicators make sense to me some of the patterns just seem like witchcraft. They're not really based on anything as far as I can tell except that 60% of the time it works everytime.

[OMG!WTF!]

http://www.huffingtonpost.ca/2015/12/01/statistics-canada-to-report-third-quarter-gdp-results-growth-expected_n_8686140.html

It must be maddening trying to pick a stock strategy off of macro economic news. It literally changes every day. I wouldn't be counting on too much fed spending in your thesis.

Charts make sense when you look at them as a visual representations of investor sentiment. The patterns are one thing and their 60% success rate. But when you understand the more important aspects like what optimism looks like and what volatility means and abnormal behavior, and combine that with patterns you really get an advantage. By the time you get the news everyone else has already read it or it has fundamentally changed.

[Slava]

Well there is a lot of noise in the market for sure, and a lot of the time you have to block it out. I don't believe that the markets are completely efficient though, so the idea that all of the information is included in the price of securities is just plain incorrect in my experience. I have found many examples of securities that are mispriced. While finding those opportunities takes time, it's effective and makes sense to me. Reading charts and making decisions from them might work, but it just doesn't make as much sense to me.

I should note that I have tried to use some technical analysis in my practice from time to time. It's not that I am totally against it or anything like that. But I want to find easy decisions to make, because there is enough hard work and challenges with investing. So I figure why make it harder than it needs to be?