# How serious are these declines?



## james4beach (Nov 15, 2012)

I've been debating with a friend about how "serious" these declines are: how badly are they perceived by most investors?

One view: the losses are quite bad because the S&P 500 is down 16% from its peak, NASDAQ down 19%, TSX down 14% from the peak, etc. VT (world) is down 17% from its peak. Those are severe enough losses to cause pain.

Another view: for the calendar year, the losses aren't too severe. S&P 500 is down just 6%, NASDAQ only down 2%, TSX down 10%. For a Canadian investor, global stocks (XAW) are only down 5%. Those numbers aren't too big and shouldn't cause anyone too much pain.

Thoughts?


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## lonewolf :) (Sep 13, 2016)

Best to look @ price structure. As long as the declines are 5 down & the rallies are 3 up we are heading lower. In a 3 wave decline waves A & C are often equal. From the all time highs in the S&P, DJI & nasdaq to the Oct 29 low if the decline from the ABC rally after the Oct 29th low starts to get larger then the decline to the Oct 29th low the odds will increase that its a 3rd wave down of a 5 down


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## lonewolf :) (Sep 13, 2016)

If the cycles your following become left translated or break below the previous cycle low with more time remaining in the cycle the market is probably heading lower.


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## Pluto (Sep 12, 2013)

How serious? There is a lot of moving parts, and its relative to what stocks one owns. if one owns a bunch of .com style small caps with a concept and no customers one is probably down somthing like 50 to 75 percent, and heading to a 95% loss or more. But if one is an index investor or has a solid portfolio, what's the big deal? Its more of a buying opportunity shaping up, than a disaster. My first bear market shere I had skin in the game was 1987 and one or more indexes dropped aproximatly 35% from the august peak, to the low in October, I think. I was terrified and got out of the market as anguised talking heads got a lot of air time while predicting the end of the world. I didn't invest again for two years while wating for the "next leg down". LOL. Meanwhile the pros such as Templeton and Buffett had been gobbling up cheap stock and smiling like the cat that ate the canary. In 2000-1 and 2008-9 some of the same 1987 anguised talking heads showed their faces and again predicted the end of the world. this time I was ready for them, and became a buyer instead of a paniced seller. Paid off big time. 

Generally on these sell offs when I'm ready to buy I try to do it on a day when there are sharp high volume drops in price. Seems a bit to early right now though; don't really have a strong opinion on that.


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## Just a Guy (Mar 27, 2012)

Anyone who was not expecting a decline was just a fool. I remember when I started investing a P/E ratio of 10 was considered “high”, today people were justifying a p/e of 40+ to be “cheap”. Not sure where the logic disappeared, except from the greed factor and the cheap interest (money) rates.

Greed always seems to justify stupidity, and then everyone acts shocked when reality sets in. 

Of course, everyone will now scream the sky is falling, many people will lose their shirts,,and the market will eventually recover and repeat itself...

Everything old is new again.


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## agent99 (Sep 11, 2013)

It's definitely a serious time for those with portfolios based on growth as large part of expected Total Return . 

Having dividends continue to flow in makes dropping market price less serious. And sometime down the road there should be opportunities to buy (for those with cash). As before, we will sit this out. As markets drop, our FI allocation goes up! But only as a misleading percentage


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## kcowan (Jul 1, 2010)

Just a Guy said:


> Anyone who was not expecting a decline was just a fool. I remember when I started investing a P/E ratio of 10 was considered “high”, today people were justifying a p/e of 40+ to be “cheap”. Not sure where the logic disappeared, except from the greed factor and the cheap interest (money) rates..


Yes and some of the FAANG stocks are the biggest contributors, especially Facebook.


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## Jimmy (May 19, 2017)

One easy measure for valuations is the 'Buffet measure' which is just Total market Cap/gdp compared to its historic mean. The market tends to work towards the mean which is a ratio of .9 for the US. The S&P is still at 1.25 and is still surprisingly significantly overvalued per this measure. Canada is more fair valued now in comparison. I think the Nasdaq is more fair valued now too.

The US is hiking interest rates so the discount rate analysts use to value markets is also rising bringing market valuations down.

The overnite rate rose ~.5% this year to 2.25% and they are expecting it to be 3.5% by YE 2019. 

Here is a good article showing expected returns by country when looking at growth, dividends and this reversion to mean of TMC/gdp. EM look the best. Singapore, Australia, Spain and Italy for DM. 

https://www.gurufocus.com/global-market-valuation.php


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## AltaRed (Jun 8, 2009)

The Fed is now talking 2-3 more rises in 2019, so that is a mere 0.5-0.75 increase... not 1% or more. 

As to James' question, I look at things on a calendar year basis or higher, e.g. CAGR on a 3-5 year basis. In my reports in Quicken, that is what I generate and keep, i.e. annual, 3, 5 and 10 years. I don't really care about the indices today relative to their calendar year highs. That is simply volatility.


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## MarcoE (May 3, 2018)

I think we're probably heading into a long, painful recession. We might bounce back from this recent decline and see more volatility. But I think a recession in 2019-2020 is likely. It will be painful. For long term investors, this can be a good buying opportunity. I was 30% in stocks before the recent declines. Now I'm probably at about 28% due to their drop in value. If I can save money in 2019, I'll put it toward raising my stock allocation back to 30%.


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## MarcoE (May 3, 2018)

Even for those without cash now: Equity ETFs will be paying their end-of-quarter DRIPs soon, so that'll be a good opportunity to grab some shares at a discount.


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## agent99 (Sep 11, 2013)

AltaRed said:


> As to James' question, I look at things on a calendar year basis or higher, e.g. CAGR on a 3-5 year basis. In my reports in Quicken, that is what I generate and keep, i.e. annual, 3, 5 and 10 years.


Problem with accounting, is that it always looks backwards. Doesn't tell you anything about what is immediately ahead. The article Jimmy linked appears to at least try and forecast what is ahead by geographic market. May not work, but at least for USA, looks credible.


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## CPA Candidate (Dec 15, 2013)

Just a Guy said:


> I remember when I started investing a P/E ratio of 10 was considered “high”, today people were justifying a p/e of 40+ to be “cheap”.


Without reference to growth rates, interest rates, risk or industry, P/E isn't very informative.



Jimmy said:


> The US is hiking interest rates so the discount rate analysts use to value markets is also rising bringing market valuations down.


True, except they will use long term (10 year) interest rates, which are determined by debt markets.

I think the Canadian market will bounce back fairly soon. A couple months ago the spread between the 10 year bond yield and Canadian high dividend index was ~2.5% and now it is ~3.5%. Meanwhile October GDP came in above estimates today.

I see this as a sentiment and fear/panic driven plunge, very reminiscent of late 2015/early 2016. I don't believe in the prescience of markets; they have predicted far more recessions than have actually happened. In the end market action is human action and humans are emotional and have been proven to act in irrational ways with respect to gain and losses (loss aversion).


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## AltaRed (Jun 8, 2009)

agent99 said:


> The article Jimmy linked appears to at least try and forecast what is ahead by geographic market. May not work, but at least for USA, looks credible.


I agree looking ahead is the important thing but that is mostly random as well and/or influenced by other factors than what can be taken at face value on the GuruFocus charts. The USA won't do nearly as badly relative to Singapore as the charts indicate for a variety of reasons.


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## james4beach (Nov 15, 2012)

The Vanguard CEO was making the rounds in the media, back in January, saying that their analysts are projecting approx 4% return going forward:
https://www.youtube.com/watch?v=gh0ERO_Kkvo



> We think valuations are stretched, so people should be very conservative around their returns assumptions. When we model it out, we see a balanced portfolio (60/40) returning 4.0% to 4.5% over the next 10 years. It doesn't mean we're in a bubble, it just means your returns are going to be lower. There are two things you can control: how much you pay for that return, and how much you personally save. The biggest leverage you have in a low return environment is to save more, to pure more away and make it work for you because you can't count on returns being exceptional in the years to come.


And that was before the big run-up in the summer.


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## james4beach (Nov 15, 2012)

By the way, I think stock market direction will largely be determined by central bank actions. Unless you're an insider who is privy to those mechanisms such as the QE programs (JP Morgan, Goldman Sachs, etc) I don't think there's any way to predict how it will go. The rest of us are along for the ride.

The stock market rally since 2009 is mainly due to central bank stimulus, IMO. You can chart the S&P 500 against aggregate central bank balance sheets and see the correlation.


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## doctrine (Sep 30, 2011)

My take is that this correction/bear market is presenting very good values. So I'm looking at buying more than I have in several years again. 

The best part about this correction is that the good companies have fallen a lot as well as the bad ones. That means you can buy quality companies at good valuations, as opposed to having to go to more risky ones. 

This is pretty close to maximum pessimism, with 1-2% daily drops and tons of negative news - trade wars, unstable governments, unilateral actions, rising interest rates, etc. It would be shocking if stock markets weren't going down. As it has been many times before, there will be people who panic and sell and will regret it or just never invest again, just like 2008-09.

Looking back at my buys from 2010-12, when the US was defaulting on its debt, government was basically shut down, and the EU was collapsing as was Greece and Italy while we were at war in Afghanistan and Iraq....I'm holding stocks still from then like Royal Bank at $47, BCE at $35, Telus at $24. They are trading at similar valuations now as they were then as are many others.


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## lonewolf :) (Sep 13, 2016)

On log scale the Nasdaq came within ticks of a trend line going back to 2011. Some of histories biggest stock market decline happen after the market has been falling for sometime & is not able to mount a meaningful rally. The conditions are present now. Yesterday the CBOE put/call ratio closed @ 1.82 its highest level going back to @ least 1983. Dec 20 the S&P futures DSI was @ 8% bulls for the 4th consecutive day. The Vix closed today @ 30.1 well below the 37.32 of Feb 5

Will be watching the price structure for a 5 wave decline in the major indexes from the all time high which would increase the odds greatly that an important top was in place. Took some TQQQ puts off the table a few minutes before the close today for a nice profit.

If a 5 waves down from the top develops will short the top of wave 2 of an ABC rally. The option premium on the puts will drop sharply during the wave 2 rally & will explode up wards during a 3rd wave down. No confirmation yet if market is forming 3 or 5 waves down from the high yet


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## james4beach (Nov 15, 2012)

doctrine said:


> This is pretty close to maximum pessimism, with 1-2% daily drops and tons of negative news - trade wars, unstable governments, unilateral actions, rising interest rates, etc. It would be shocking if stock markets weren't going down. As it has been many times before, there will be people who panic and sell and will regret it or just never invest again, just like 2008-09.


It doesn't feel anything like maximum pessimism to me. Volume is still pretty low (just slightly elevated) but nowhere near the kind of panic selling that has occurred during other rough markets I've seen. To me, it feels like an orderly and steady exit from stocks.


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## lonewolf :) (Sep 13, 2016)

james4beach said:


> It doesn't feel anything like maximum pessimism to me. Volume is still pretty low (just slightly elevated) but nowhere near the kind of panic selling that has occurred during other rough markets I've seen. To me, it feels like an orderly and steady exit from stocks.


 Yes this is no where close to a historical bottom. The market might be getting close to a bottom price wise if the bull market from 09 is still intact or close to a temporary bottom in a bear market. Would not want to be long the market unless I was hedged. Crashes happen in oversold conditions.


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## MarcoE (May 3, 2018)

There's certainly a lot of pessimism lately, but I wouldn't call it panic. "Panic" would be if the stock market fell 50%. But the S&P hasn't even fallen 20% (as of me writing this) and isn't even in a bear market.


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## My Own Advisor (Sep 24, 2012)

Unless it's down >20%. No worries.


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## Just a Guy (Mar 27, 2012)

CPA Candidate said:


> Without reference to growth rates, interest rates, risk or industry, P/E isn't very informative.


Yeah, I remember the talking heads trying to convince people of that same thing during the .com era. Companies don’t need to actually make money, it’s the new economy.

Meanwhile, those of us who believed a company had to actually make money didn’t lose our shirts. Silly us.


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## MarcoE (May 3, 2018)

My Own Advisor said:


> Unless it's down >20%. No worries.


The NASDAQ is down >20%, and the S&P 500 isn't too far off. We might get there. It's not pretty. But it's also not a complete meltdown like in 2008. Not even close. I have no idea what'll happen next year. I see this as a good buying opportunity. I'm allowing my dividends to come in as per usual, and I'm putting them toward buying more shares at cheap prices.


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## lonewolf :) (Sep 13, 2016)

MarcoE said:


> The NASDAQ is down >20%, and the S&P 500 isn't too far off. We might get there. It's not pretty. But it's also not a complete meltdown like in 2008. Not even close. I have no idea what'll happen next year. I see this as a good buying opportunity. I'm allowing my dividends to come in as per usual, and I'm putting them toward buying more shares at cheap prices.


 The price chart from the 07 high & the 2018 high in S&P is following a somewhat of a similar pattern.


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## lonewolf :) (Sep 13, 2016)

AltaRed said:


> The Fed is now talking 2-3 more rises in 2019, so that is a mere 0.5-0.75 increase... not 1% or more.
> 
> .


 The private bank the fed in 1929 raised interest rates to cause a crash to punish the banks that broke away from the fed.

The deep state does not like Trump & wants Trump out. There is a reason the Fed keeps raising rates on Trump.


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## doctrine (Sep 30, 2011)

This may not be 2008 but silly things are happening. Companies are trading normally, then release earnings that are pretty good, and are getting hammered in trading. Companies that release bad earnings reports are getting totally obliterated. Definitely good opportunities to buy good companies at fair prices.


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## humble_pie (Jun 7, 2009)

doctrine said:


> This may not be 2008 but silly things are happening. Companies are trading normally, then release earnings that are pretty good, and are getting hammered in trading. Companies that release bad earnings reports are getting totally obliterated. Definitely good opportunities to buy good companies at fair prices.



somewhere else i've posted how the canada pension plan IB, ONEX & blackstone are buying alcoa, the aluminum company of america. It could be a sign that commodities are troughing. 

they say that commodities turn upwards in the last stages of a bear market, aka the earliest stages of a new bull market. If that's what's happening then 2018 slippage has got to be one of the briefest bear markets on record.

another sign: the Baltic Dry index bottomed in early 2016, has been trending up ever since. That's almost 3 years now. Dry ships are bulk carriers - iron ore, crude oil, grain - ie they are the first signal that world economic recovery is underway.

none of the above aligns with my feeling, though, which is that the worst is yet to happen. Still, the above are reasons not to sell anything either.


.


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## jargey3000 (Jan 25, 2011)

humble_pie said:


> somewhere else i've posted how the canada pension plan IB, ONEX & blackstone are buying alcoa, the aluminum company of america.
> 
> 
> .


humle, you seem to be bringing up this topic a lot....
Question: I held Onex years ago, sold it too soon ( what else is new) & watched it climb higher ever since.
Based on the above, would you venture to say this might be a good time to re-board the onex train? 
or, hold off ,as it ,along with the markets, will likely slip lower before this is all over?


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## james4beach (Nov 15, 2012)

doctrine said:


> This may not be 2008 but silly things are happening. Companies are trading normally, then release earnings that are pretty good, and are getting hammered in trading. Companies that release bad earnings reports are getting totally obliterated.


I don't think anything silly is happening. I think the artificial stimulus of the last 9 years is what has been silly. _That_ was the distortion, resulting in market-wide addiction to central bank stimulus, and the S&P 500 moving ridiculously higher. Something like 13% annual returns. Starting with the powerful commitment by central banks in 2008 to not let the stock market keep sliding. That was the start of the intervention, and it's just kept going since then.

When the stimulus started, many people knew they were watching fake price action. The economy & market was clearly being juiced (as announced by the central banks) with global ZIRP and QE. But after a while, people started thinking it's normal, and came to expect it.

So now that stimulus is withdrawn, some of that fake, juiced price action is reversing. That doesn't seem silly to me at all... it's very sensible. Global stock markets are tightly coupled and bundled into indexes and ETFs, so they are all basically bought and sold "together".

It's not like there's going to be a global selloff that leaves RY (or whatever individual stock) untouched. These stocks *all* got pulled upward by stimulus before, expanding P/E multiples, giving them easier credit, and inflating the assets on their balance sheets.

Since they all got pulled upward by stimulus, isn't it perfectly logical for them all to get dragged downward when stimulus is withdrawn?


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## Pluto (Sep 12, 2013)

So the thread kind of morphed into predicting and there are some flawed prediciting methods that appear in the media. 
One is, the leading economic indicators are pointing up, therefore the stock market will be fine. That's flawed partly because the economic fundamentals are always rosey at the bull market tops - that's why the market got to a top. Another reason is the stock market is one of the leading economic indicators - how can leading indicators predict themselves? They can't. 
A second flawed theme I hear from talking heads is they don't see a recession in the offing, therefore stocks will be fine. Since when was predicting a recession reliable? Since never. Besides, once a recession is officially announced, stocks are already down. 

So I ignore 1. the leading economic indicators argument, and 2. the I don't see a recession on the horizon argument. Neither ever work. 

What seems to work, roughly, is low unemployment combined with rising rates: When unemployment is low and rates are rising, the odds of a bear market get higher and higher. 

There will be a rally in stocks, but my guess is it will not go to new highs as rising rates will preempt that. When the rally runs out of gas, look for a lower low. Once it gets realy really serious, its buying time again. So don't worry, be happy.


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## doctrine (Sep 30, 2011)

james4beach said:


> Since they all got pulled upward by stimulus, isn't it perfectly logical for them all to get dragged downward when stimulus is withdrawn?


I don't think so. While central banks have increased their rates, actual interest rates for business and governments are lower than a year ago. That means companies can borrow easier and cheaper than a year ago. Yet markets are down 20%. Despite more cheap credit available, companies may not want to take it if they fear a recession. 

Recessions are by and large a self fulfilling prophecy. Companies will stop spending and investing and consumers will stop spending because they think there will be a recession, thus causing the recession or making it worse. A dropping stock market means nothing on its own. But typically it will drop 6-9 months before the recession actually begins. This could be a predictor, but it also just might be fulfilling its own prophecy by leading to companies and individuals to stop investing. And investors are selling the news now, ferociously.


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## MarcoE (May 3, 2018)

I have no idea what'll happen next year. Nobody does. All I can look at is the present. Today I see that equity ETFs are priced much more attractively than a few weeks ago. That hurts my portfolio, yes. But it also presents a great buying opportunity. I finally feel a little better about buying stocks. I spent most of 2018 putting my money toward bonds and gold, since stocks seemed so expensive. Now I intend to grab a shopping cart and browse for stocks at a discount.


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## MarcoE (May 3, 2018)

"The time to buy is when there's blood in the streets." -- Baron Rothschild.

I'm starting to see some blood spill. Buyers should celebrate.


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## james4beach (Nov 15, 2012)

doctrine said:


> I don't think so. While central banks have increased their rates, actual interest rates for business and governments are lower than a year ago. That means companies can borrow easier and cheaper than a year ago. Yet markets are down 20%. Despite more cheap credit available, companies may not want to take it if they fear a recession.


Since a year ago, stocks are only down 10% which is a small movement as far as stocks are concerned. This is a very volatile asset class and +/- 10% in one year is virtually nothing, for an asset that easily moves 2% in one day.

Even with constant earnings, swings of around 25% seem completely normal to me just based on market psychology and mood (being the multiple, P/E). I don't think it's necessarily a reflection of earnings declining at all.

Stocks are naturally volatile at the whims of investor mood. Only in recent years have people come to expect very smooth and steady price increases, but stock markets have been unnaturally calm in the last few years. Historically, +/- 2% days and +/- 10% years are very normal.


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## jargey3000 (Jan 25, 2011)

so, it seems to me, , as always... that nobody knows what the hell is going on, or, what the hell is going to happen... Merry Xmas!


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## agent99 (Sep 11, 2013)

*Merry Christmas.*



jargey3000 said:


> so, it seems to me, , as always... that nobody knows what the hell is going on, or, what the hell is going to happen... Merry Xmas!


jargey, do you have data to back up your conclusions? :smilet-digitalpoint

Merry Christmas to all!


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## MarcoE (May 3, 2018)

“A short quiz: If you plan to eat hamburgers throughout your life and are not a cattle producer, should you wish for higher or lower prices for beef? Likewise, if you are going to buy a car from time to time but are not an auto manufacturer, should you prefer higher or lower car prices? These questions, of course, answer themselves.

“But now for the final exam: If you expect to be a net saver during the next five years, should you hope for a higher or lower stock market during that period?

“Many investors get this one wrong. Even though they are going to be net buyers of stocks for many years to come, they are elated when stock prices rise and depressed when they fall. In effect, they rejoice because prices have risen for the ‘hamburgers’ they will soon be buying.

“This reaction makes no sense. Only those who will be sellers of equities in the near future should be happy at seeing stocks rise. Prospective purchasers should much prefer sinking prices.”

-- Warren Buffet


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## CPA Candidate (Dec 15, 2013)

The slope of the curve is getting so vertical now that a bounce is imminent. Perhaps the holidays will provide a few days of sober second thought on mass selling based on gloomy speculation.


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## CPA Candidate (Dec 15, 2013)

doctrine said:


> I don't think so. While central banks have increased their rates, actual interest rates for business and governments are lower than a year ago.


Indeed. Long term interest rates are not controlled by central banks, overnight rates have minimal impact on long term rates. I think this needs to be written in blinking 50 foot high lights. The BoC could raise tomorrow and it would do nothing to the rest of the curve at the moment.

Given the complete flattening of the yield curve I proposed to the CFO of the company I work for to exchange our variable rate debt for fixed via a interest rate swap and he was quite interested in the idea.


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## james4beach (Nov 15, 2012)

Anyone else think the Canadian yield curve might invert in the coming weeks? There is now only 7 bp between the 2 & 10 year.

2 year: 1.91%
5 year: 1.92%
10 year: 1.98%
30 year: 2.15%

These rates are unbelievable!! I get paid more interest in my credit union cash account than the 30 year bond. And a GIC beats every rate across the bond yield curve. Just wacky stuff. There's a good chance we're looking at lower interest rates in the future. Luckily everyone held onto their bond allocations, right?


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## AltaRed (Jun 8, 2009)

Look for some substantial GIC rate declines come early January. GIC rates are impacted by 2 and 5 year bonds yields.


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## like_to_retire (Oct 9, 2016)

CPA Candidate said:


> The slope of the curve is getting so vertical now that a bounce is imminent. Perhaps the holidays will provide a few days of sober second thought on mass selling based on gloomy speculation.


Yeah, I try and not look too close, but this month so far I'm down a couple really nice cars, but I take solace in my dividend increases this year at 7.9% along with the GIC renewals increasing an amazing amount considering what the 5 year rates were 5 years ago. Big increase in income for us retired guys.

I am also pleased that after 12 years I no longer have preferred shares to concern myself with. I fortuitously sold my last one in May. I had been dialing that portion of my fixed income to zero after deciding that preferred shares over the long run haven't done a lot for me compared to other types of fixed income. I was lucky that May was their peak and have nosedived since then. I put a lot of work into prefs over the last decade and it's always boom and bust. The problem is you're trading with a group of nincompoops who don't understand them. I may as well trade with school children. Anyway, over 11.5 years I made a geometric average annual Total Return of 2.7%. Embarrassing, and it ain't because I don't understand them - I do. Anyway, no more prefs for me and good luck to all the buyers right now with these depressed prices (been there - done that).

I don't know what next year will hold, but I'm guessing that my income will go up. Share prices - meh....

ltr


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## Karlhungus (Oct 4, 2013)

james4beach said:


> Anyone else think the Canadian yield curve might invert in the coming weeks? There is now only 7 bp between the 2 & 10 year.
> 
> 2 year: 1.91%
> 5 year: 1.92%
> ...


100% stocks baby


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## james4beach (Nov 15, 2012)

AltaRed said:


> Look for some substantial GIC rate declines come early January. GIC rates are impacted by 2 and 5 year bonds yields.


Yeah, this seems like a great time to buy GICs. I've been tracking the 10 year bond vs 5 yr big bank GIC rates since 2013 (the two competing purchases for my fixed income portfolio). The spread of the GIC to the 10 year varies from 15 - 100 basis points with an average of 60. Today's reading is 127, off the charts high... the highest spread I've ever seen.

When the spread is on the high side, I buy GICs. When it's on the low side, I buy the 10 year/XBB. This technique has served me well over the last few years.


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## Bruins63 (Jan 18, 2018)

I managed to negotiate a GIC ladder with one of the BIG banks 1-5 years 3.05-4.05 percent across 5 years...had to transfer a pile of $$ to them to make it happen...should I throw more at it?


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## james4beach (Nov 15, 2012)

Bruins63 said:


> I managed to negotiate a GIC ladder with one of the BIG banks 1-5 years 3.05-4.05 percent across 5 years...had to transfer a pile of $$ to them to make it happen...should I throw more at it?


Sorry I don't have an answer on that one but I'm just curious. Did you earlier have a thread where you had experienced some losses in the summer and were asking us if you should get out, and were debating reducing your stock exposure? Curious if you ended up being more conservative with stocks after that.

Best wishes, Happy Holidays


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## lonewolf :) (Sep 13, 2016)

doctrine said:


> I don't think so. While central banks have increased their rates, actual interest rates for business and governments are lower than a year ago. That means companies can borrow easier and cheaper than a year ago. Yet markets are down 20%. Despite more cheap credit available, companies may not want to take it if they fear a recession.
> 
> Recessions are by and large a self fulfilling prophecy. Companies will stop spending and investing and consumers will stop spending because they think there will be a recession, thus causing the recession or making it worse. A dropping stock market means nothing on its own. But typically it will drop 6-9 months before the recession actually begins. This could be a predictor, but it also just might be fulfilling its own prophecy by leading to companies and individuals to stop investing. And investors are selling the news now, ferociously.


 E motion, Energy in motion comes first as it supplies the energy to take action. The action shows up after the emotion as it is the result of the E motion. 

Negative energy in motion first shows up in lower stock prices then the economy as negative emotion shows up faster in the stock market then it does in the economy.

The mood of the masses swings from positive to negative of different degrees of trend. Stock index prices track the emotion of the masses digitally


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## Bruins63 (Jan 18, 2018)

james4beach said:


> Sorry I don't have an answer on that one but I'm just curious. Did you earlier have a thread where you had experienced some losses in the summer and were asking us if you should get out, and were debating reducing your stock exposure? Curious if you ended up being more conservative with stocks after that.
> 
> Best wishes, Happy Holidays


Thanks, Happy Holidays to you also Sir...yes, I pulled out of the market in Feb, when it hit its low mid Feb...my FA had me in a 90 percent equity play...thank goodness I pulled out when I did...stayed in cash until a month ago and thus far have a 90/10 GIC/Equity position...if I had not pulled out I would have lost close to 2 years of gains...Happy with 3.05-4.05 percent on my 1-5 year GIC ladder and no stooooopid FA fees at a grand a month...

Edit: my FA did not believe in Sequence of Returns...as I’m nearing retirement, all my research showed me it is real and the markets performance this year cemented my beliefs....


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## kcowan (Jul 1, 2010)

Pluto said:


> There will be a rally in stocks, but my guess is it will not go to new highs as rising rates will preempt that. When the rally runs out of gas, look for a lower low. Once it gets realy really serious, its buying time again. So don't worry, be happy.


I am looking forward to you going on record with your guesses in the official guessing thread: 2019 Predictions Contest.


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## Earl (Apr 5, 2016)

I've lost thousands in my TFSA in the past two months or so. Got some new tfsa contribution room becoming available in he new year, I have the money waiting in my checking account to be transfered, but not sure whether to buy anything as soon as I transfer it, or wait a while.


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## AMABILE (Apr 3, 2009)

I'm in the same boat Earl

seriously looking at buying all those beaten down OIL STOCKS


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## kcowan (Jul 1, 2010)

Earl said:


> I have the money waiting in my checking account to be transfered, but not sure whether to buy anything as soon as I transfer it, or wait a while.


If you need to be sure, then you are not suited to equity investments. I would wait a little longer until there are sign of a bottom but I am not you.


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## Thal81 (Sep 5, 2017)

kcowan said:


> If you need to be sure, then you are not suited to equity investments. I would wait a little longer until there are sign of a bottom but I am not you.


I find it's hard to tell the bottom, you can only tell once you're well into the upswing and by then it's either too late, or you're too scared its gonna come back down so you wait more and then you might completely miss the opportunity.

Earl, you could consider buying some (25% of your total?) as soon as you can, then wait and see for a few weeks, then buy some more, etc... basically dollar cost average into the dip so you will not completely miss out if it goes back up quickly, or completely feel screwed if it goes down another 20%.


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## Onagoth (May 12, 2017)

Thal81 said:


> I find it's hard to tell the bottom, you can only tell once you're well into the upswing and by then it's either too late, or you're too scared its gonna come back down so you wait more and then you might completely miss the opportunity.
> 
> Earl, you could consider buying some (25% of your total?) as soon as you can, then wait and see for a few weeks, then buy some more, etc... basically dollar cost average into the dip so you will not completely miss out if it goes back up quickly, or completely feel screwed if it goes down another 20%.


This is pretty much what I've been doing. Bought at 10% down, buying more at 20% down, and saving some dry powder for if we hit 30%.

Any deeper than that and I might have to add new money to take advantage, but haven't gotten there yet.


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## Saniokca (Sep 5, 2009)

So how is everyone doing so far? After a 9.5% drop in December (so far) I am 1.9% up YTD...


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## sags (May 15, 2010)

The TSX index is below the level it was in June 2007. Total return looks better..........doubling values in 18 years.

So..........does that mean that "new" money invested into a TSX index fund since 2007 has lost value or had tepid returns ?

Maybe the money would have been better spent on assets that would last a lifetime (inflation), paid off debt (higher rate of return), or invested in GICs ?


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## Jimmy (May 19, 2017)

Onagoth said:


> This is pretty much what I've been doing. Bought at 10% down, buying more at 20% down, and saving some dry powder for if we hit 30%.
> 
> Any deeper than that and I might have to add new money to take advantage, but haven't gotten there yet.


Yes. I have monthly income and have been buying through the highs and lows. I knew markets were a bit pricey back in Jan and Feb but thought they would still do 7 or 8% this year. I think you need your own valuation models for the market so you know what the fundamental value is to compare. The fed hikes have raised the return discount factors and the US markets were repricing in part to that.

Going forward, I might just place the $ in cash or a ST bond fund when the markets get a little overvalued instead. The RSI is a good indicator too ( below 30 is oversold) .

Right now though the Nasdaq, EU, EM and Canada look to be undervalued. Just don't know how serious all this China trade noise is though.


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## Pluto (Sep 12, 2013)

kcowan said:


> I am looking forward to you going on record with your guesses in the official guessing thread: 2019 Predictions Contest.


LOL. Well I guess I'm on record here, so no matter what happens, its too late for me to unopen my big mouth.


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## Pluto (Sep 12, 2013)

AMABILE said:


> I'm in the same boat Earl
> 
> seriously looking at buying all those beaten down OIL STOCKS


the last time I thought like that, I got creamed. Is there anything anyone can do to divert your attention to something else?


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## jargey3000 (Jan 25, 2011)

Bruins63 said:


> I managed to negotiate a GIC ladder with one of the BIG banks 1-5 years 3.05-4.05 percent across 5 years...had to transfer a pile of $$ to them to make it happen...should I throw more at it?


just wondering...approx. how much is "a pile of $$"...?


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## james4beach (Nov 15, 2012)

sags said:


> The TSX index is below the level it was in June 2007. Total return looks better..........doubling values in 18 years.
> 
> So..........does that mean that "new" money invested into a TSX index fund since 2007 has lost value or had tepid returns ?
> 
> Maybe the money would have been better spent on assets that would last a lifetime (inflation), paid off debt (higher rate of return), or invested in GICs ?


Since 2007-06-01, based on stockcharts (which is reasonably accurate for total returns), cumulative total returns, not annualized, are
XIU +37%
XBB +62%
XSP +65%
XIN +0%

That means bonds have returned significantly more than the TSX in this 11 year time period. GICs would have probably returned around the same as bonds.


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## Bruins63 (Jan 18, 2018)

jargey3000 said:


> just wondering...approx. how much is "a pile of $$"...?


It’s “could be” a nice round number that starts with a 1...it’s not $100k and it’s not $10M...


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## doctrine (Sep 30, 2011)

Markets bounced off the bear market support line pretty hard. No official end of the S&P 500 bull today. Tomorrow might be buying day, but some traders look for 3 positive days before believing the bounce too much. This bounce won't even bring most markets above the 10 day moving average.


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## Bruins63 (Jan 18, 2018)

Juuuuust seeing if anyone is buying CDN equities tomorrow, given today’s surge...I’m thinking of throwing $100k at it that I don’t have to touch for a few years...


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## james4beach (Nov 15, 2012)

Bruins63 said:


> Juuuuust seeing if anyone is buying CDN equities tomorrow, given today’s surge...I’m thinking of throwing $100k at it that I don’t have to touch for a few years...


Well the price increases will already be priced in the Canadian securities. Even if you buy first thing in the morning, you'll be buying after the big price jump is taken into account -- you don't get to first watch the price gain, and then buy at the old price


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## Bruins63 (Jan 18, 2018)

james4beach said:


> Well the price increases will already be priced in the Canadian securities. Even if you buy first thing in the morning, you'll be buying after the big price jump is taken into account -- you don't get to first watch the price gain, and then buy at the old price


Thanks for the info...so even if I go to my trading account and say for example BMO is showing today’s price, and I order tonight, I won’t be able to buy it at that price? Is that because there are a whack of buyers before me and that’s what has driven the stock price up?

Edit: so I just looked at my trading account with BMO as an example...Close was $86.32, Bid was $86.30 and ask was $86.52...does that mean tonight I could buy at $86.52? That’s not a big jump...am I misunderstanding?


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## like_to_retire (Oct 9, 2016)

Bruins63 said:


> Thanks for the info...so even if I go to my trading account and say for example BMO is showing today’s price, and I order tonight, I won’t be able to buy it at that price? Is that because there are a whack of buyers before me and that’s what has driven the stock price up?
> 
> Edit: so I just looked at my trading account with BMO as an example...Close was $86.32, Bid was $86.30 and ask was $86.52...does that mean tonight I could buy at $86.52? That’s not a big jump...am I misunderstanding?


I was going to write a few words about opening price following a change in off hours, but I looked at Investopedia and they really said it nicely, so read this.

Anyway, doesn't much matter what your BMO is showing right now. They'll determine an appropriate opening price, given factors that occurred today and off hours.

ltr


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## Bruins63 (Jan 18, 2018)

like_to_retire said:


> I was going to write a few words about opening price following a change in off hours, but I looked at Investopedia and they really said it nicely, so read this.
> 
> Anyway, doesn't much matter what your BMO is showing right now. They'll determine an appropriate opening price, given factors that occurred today and off hours.
> 
> ltr


Nicely said, thank you...I’ll wait for the open


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## AltaRed (Jun 8, 2009)

The Bid/Ask prices will change leading up to opening bell. Those with real time Level 2 quotes will see the jockeying going around with the various limit orders but those bid/ask numbers don't represent all of the market. If I am interested in a stock, I will watch the first 15 minutes or so and decide if I should pull the trigger. Rarely ever have, but it is an interesting mental exercise. Sometimes when there is a rush to sell, there is a big drop near opening bell, then a bit of a surge as bargain hunters rush int, only to see the stock waver again later in the trading day.

Back in 2008 when the crisis was at its worst, perhaps when Lehman Bros went bankrupt over the weekend, some folks did very well at opening bell on the Monday within the first 1-2 minutes of trading with a broad market index ETF. The bottom fell out of the market price because there were an overwhelming number of sell orders with no one buying. A few people over on FWF did well grabbing a Buy at very low levels and then selling again when the market recovered a fair bit hours later. You have to be a very savvy investor to know when to pull those triggers. It is not for the inexperienced retail investor.


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## like_to_retire (Oct 9, 2016)

AltaRed said:


> You have to be a very savvy investor to know when to pull those triggers. It is not for the inexperienced retail investor.


Yeah, the first 2 hours and the last hour of trading are usually quite volatile and are filled with the inexperienced being manipulated by experienced day traders. It's best to avoid those times unless you have level II and you know what you're doing. I always wait until 11:30-12:00 when the market has settled down, then I make a decision if I like the prices. Everybody is different though.

ltr


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## Bruins63 (Jan 18, 2018)

AltaRed said:


> The Bid/Ask prices will change leading up to opening bell. Those with real time Level 2 quotes will see the jockeying going around with the various limit orders but those bid/ask numbers don't represent all of the market. If I am interested in a stock, I will watch the first 15 minutes or so and decide if I should pull the trigger. Rarely ever have, but it is an interesting mental exercise. Sometimes when there is a rush to sell, there is a big drop near opening bell, then a bit of a surge as bargain hunters rush int, only to see the stock waver again later in the trading day.
> 
> Back in 2008 when the crisis was at its worst, perhaps when Lehman Bros went bankrupt over the weekend, some folks did very well at opening bell on the Monday within the first 1-2 minutes of trading with a broad market index ETF. The bottom fell out of the market price because there were an overwhelming number of sell orders with no one buying. A few people over on FWF did well grabbing a Buy at very low levels and then selling again when the market recovered a fair bit hours later. You have to be a very savvy investor to know when to pull those triggers. It is not for the inexperienced retail investor.


Thanks for the info...hard to tell where the bottom is. Up one day down the next.


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## james4beach (Nov 15, 2012)

Bruins63 said:


> Juuuuust seeing if anyone is buying CDN equities tomorrow, given today’s surge...I’m thinking of throwing $100k at it that I don’t have to touch for a few years...


I seem to remember from the past that you were somewhat conservative. If you're thinking of buying, I suggest sticking to your asset allocation target % and not buying more than that. Being the end of the year, this is a fine time to rebalance, but let your targets guide "how much" stock you should buy.

For example, my target is 30% stocks. In mid December I was at something like 25% stocks due to the sharp drop. When I did my 6 month rebalancing over the last couple weeks, I bought more to get stocks back up to 30% of my total. Now that I'm already at my target, I won't buy any more. The asset allocation approach automatically gets you to "buy low" because whatever asset has dropped (stocks in this case) ends up being purchased. This is meant for index investing.


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## Bruins63 (Jan 18, 2018)

james4beach said:


> I seem to remember from the past that you were somewhat conservative. If you're thinking of buying, I suggest sticking to your asset allocation target % and not buying more than that. Being the end of the year, this is a fine time to rebalance, but let your targets guide "how much" stock you should buy.
> 
> For example, my target is 30% stocks. In mid December I was at something like 25% stocks due to the sharp drop. When I did my 6 month rebalancing over the last couple weeks, I bought more to get stocks back up to 30% of my total. Now that I'm already at my target, I won't buy any more. The asset allocation approach automatically gets you to "buy low" because whatever asset has dropped (stocks in this case) ends up being purchased. This is meant for index investing.


Thanks, yes, I’m trying to do an 80/20...Thus far only 10 percent in Equities so another 10 percent to go...


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## Pluto (Sep 12, 2013)

Bruins63 said:


> Juuuuust seeing if anyone is buying CDN equities tomorrow, given today’s surge...I’m thinking of throwing $100k at it that I don’t have to touch for a few years...


Not me. Too early. I doubt this decline is over. The big bounce was probably early bird value players and short covering. There is likely more declines to come. There is no big rush to get into stocks in these situations: they come down faster than they go up, so there is plenty of time to get good value.


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