July 8, 2015 by Speakers' Spotlight
A Look Inside Jeff Rubin’s Portfolio, and Why It Doesn’t Include Oil
Author and economist Jeff Rubin is a self-described “macro guy” who approaches investing a little differently than most. He doesn’t pick stocks or leave his money in the hands of portfolio managers. The former chief economist at CIBC World Markets turned author of bestselling books such as Why Your World Is About To Get A Whole Lot Smaller: Oil and the End of Globalization has a pretty simple investment portfolio. In fact, it too is about to shrink. The Globe and Mail spoke with Jeff about what’s in his portfolio after the recent release of a third book, The Carbon Bubble: What Happens To Us When It Bursts.
What are you invested in?
“Anything that will make me money. Like most Canadians, I’m invested in the real estate and stock market. My home in Toronto has probably been one of the best long-term investments I’ve made. I know pundits continue to call for a housing market correction. I remain skeptical. I started my career calling for a housing market crash in 1989. My forecast of a 25-per-cent decline in Toronto housing prices – that was ridiculed at the time – became pretty right on. I don’t see that happening today. It’s not because the market isn’t overvalued. What’s lacking is the pin to break the bubble. In 1989-90, the pin was soaring short-term interest rates. I think the next move for the Bank of Canada is going to be a cut. Unfortunately for me, I’m about to lose my share of my house in a pending divorce settlement. That’s going to put a hole in my portfolio. The value has gone up, I’m just not going to see any of it.”
Are you going to get back into real estate?
“I certainly wouldn’t be scared of buying again. I invested in a semi-detached home. I’m not sure the condominium market is as robust as the semi- or detached-home market. Certainly the latter market, if circumstances warranted, I wouldn’t hesitate getting back in.”
What about equities?
“I’m not in the TSX, because of oil. My reasons aren’t to save the world, but to save my portfolio. Not only is the TSX one of the most oily of the major stock indices in the world, it also has the highest-cost oil, which is the oil sands. They may be the jewel of the economy in the Prime Minister’s eyes, but they’ve been a dog’s breakfast in the market’s eyes, and I don’t just mean over the last 12 months, but over the last five or six years. I think the oil sands continue to be a huge albatross around the index. I think the S&P 500 is a better deal. I would buy the TSX if somebody were to offer me the index minus the oil sands or the carbon.”
Why not buy individual stocks?
“I’m a macro guy, so my style is going to be from the top down – index or exchange-traded funds.”
What has been your best investment?
“A triple in Stelco – a firm that no longer exists – after the 1990-91 recession.”
What has been your worst investment?
“My CIBC Employee Private Equity Co-Invest Fund. Like most managing directors at CIBC World Markets, I thought we were going to get in on the ground floor of a lot of juicy private-equity deals. Like all private-equity deals, this involved a lot of leverage. The fund performed poorly. Over a decade later, I’m still paying off the loan the bank was kind enough to offer on it.”
What do you want to invest in, but can’t?
“My dream investment is Prairie farmland. If I had to farm it, it would quickly turn into a nightmare. But if the next time the Canada Pension Plan Investment Board wants to scoop up prime Saskatchewan farmland, I wish they would invite me along to co-invest along with them. I think that Canadian Prairie farmland is the probably the hottest asset class out there. If you consider what the impact of climate change is going to be on that versus oil, particularly high-cost, emission-intensive oil, I think Canada has a lot better chance of being the world’s breadbasket than an energy superpower.”