Some Things Just Can’t be Timed; Empty Homes; Low-Carbon Economies

Q2 | July 2019

stack of old newspapers, pile of old newspapers

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Devin Crago, CFA

July 8, 2019

Image used with permission: iStock/hanohiki


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Some Things Just Can’t be Timed; Empty Homes; Low-Carbon Economies

Q2 | July 2019

Reading is one of the principal occupations in our profession. As we digest a wide range of material, interesting ideas and surprising facts – some serious and some light-hearted – rise to the surface. We attempt to share a few of those with you in each of our issues of Nexus Notes.

Some things just can’t be timed

At Nexus, we often note the folly of trying to time the market. The only task more quixotic might be trying to time when you are born. And yet, that matters quite a bit for investment returns. According to numbers from Ritholtz Wealth Management, if you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year. While this might be an example of “cherry-picking” the data, it does bring home the point that there are many factors that determine investment outcomes. As such, it’s best to incorporate conservative assumptions into your financial plan just in case you weren’t born when the investment stars were aligned. (“The Twenty Craziest Investing Facts Ever”, The Irrelevant Investor, March 13, 2019.)

Empty homes (that aren’t in Vancouver)

Canadians have been inundated with tales of homes sitting empty in Vancouver. The reasons for this phenomenon are difficult to pin down. But the provincial government has seen enough to institute a “Speculation and Vacancy Tax”, while the city has put in place a separate “Empty Homes Tax” to combat the problem. Yet, Vancouver is not alone in enduring this empty-home phenomenon. In Japan, approximately 14% of the housing stock is currently vacant. This represents a total of 8,460,000 homes across Japan, a record high. Stripping out homes that are available for sale, rental or are vacation homes lowers the Japanese vacancy rate to a still impressive 6%, or 3,470,000 homes. In contrast to Vancouver, the reasons for Japan’s high vacancy rates are fairly easily explained: (1) a shrinking Japanese population and (2) the flight of youth from rural towns to cities in search of jobs. (“One in Seven Homes in Japan is Empty”, Bloomberg, April 19, 2019.) 

 Low-carbon economies

A recent research report from Raymond James delved into the rate of decarbonization of the U.S. economy. The conclusion was that U.S. CO2 emissions have been gradually declining for more than a decade. Most of the emission reductions have come from the electric power sector, which accounts for 26% of U.S. emissions, where the retirement of coal-powered plants has been the driving factor. Change has been slower in other key sectors including Transportation (30% of emissions), Industry (22%), Commercial and Residential Buildings (11%) and Agriculture (9%). The U.S. economy may continue to reduce its emissions, spurred by technological advancements and regulatory mandates. However, the bigger question for the global climate is whether other major countries can follow suit and transition to low-carbon economies. (“Energy Stat: To What Extent Can the U.S. Become a Low-Carbon Economy?”, Raymond James, April 22, 2019.)

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