# How are you investing these days?



## CanadianCapitalist (Mar 31, 2009)

How are you investing your money these days?


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## HaroldCrump (Jun 10, 2009)

Too bad we can't select more than one option 
My personaly strategy is to keep looking for deals - either bonds offering attractive yield with reasonable credit safety or stocks that hover close to my target price.
Very slim pickings these days, even with the 3 figure crashes.
Most of the strong dividend payers that I'm ogling are still above my buy range.
I'd be interested to know what others are considering buying these days (or actively buying).


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## CanadianCapitalist (Mar 31, 2009)

HaroldCrump said:


> Too bad we can't select more than one option
> My personaly strategy is to keep looking for deals - either bonds offering attractive yield with reasonable credit safety or stocks that hover close to my target price.
> Very slim pickings these days, even with the 3 figure crashes.
> Most of the strong dividend payers that I'm ogling are still above my buy range.
> I'd be interested to know what others are considering buying these days (or actively buying).


I recently purchased VEA only because it is the one asset class that is well below my target. Other than that, I haven't been buying anything.


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## Sampson (Apr 3, 2009)

HaroldCrump said:


> Too bad we can't select more than one option


+1. I abstained. 

My investment strategy has not changed. I continue to accumulate cash, bonds and stocks. My adjustments over the past few years have kept my asset allocation steady and on-track with my plan 

We've been accumulating cash lately, not because of divergence from 'the plan' but to fund a year+ of mat-leave for my wife, and a sizeable RESP contribution right up front.


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## chaudi (Sep 10, 2009)

just sold some greenback will buy again @.98


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## Jon_Snow (May 20, 2009)

Although I have made a recent foray into dividend stock investing, I hold over 100k in a GIC, another 40k in plain ol' savings accounts. I don't have a huge appetite for risk.

Good thing is, the final two years of my three year GIC are paying out 4.25% and 5.25% respectively - in today's environment, I'm tickled with these returns.


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## Mike59 (May 22, 2010)

I would have voted "stocks for the long run" in the past, but after cumulative insults (the 2008 crash), and now the Euro crisis, I'm throwing in the towel for this lifetime and adopting a different approach. 

I continue my "cut and run" away from stocks. I've been selling back my Cdn and US Index investments and dumping into:
- Precious Metal funds
- Real Return Bond Funds
- Hi-Yield Bond Funds
- Money market (as a resting point until I decide what else to do)
I feel a need to protect against both deflation, then hyperinflation hence the diversity...

My eye is on China and some non-NorthAmerican/Non-European funds for international exposure. 

As an aside,
I think gold should have a different description in the poll- it's not as much about the world coming to an end, and more to do with the fact that gold has a natural balance point (vs. the Dow especially) that the governments countinue to delay by monkeying with interest rates and bailouts.


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## dogcom (May 23, 2009)

I chose gold the world is going to pieces. But really it is debt going to pieces until we can start over again with some kind of sound world currency or currencies without all the debt.

Of course I do not hold 100% gold but more like 20% gold which is a high holding for most people. One could hold all cash and bonds but if the central banks were able to print enough money you could be in trouble.


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## michika (Apr 20, 2009)

Some cash, some stocks, and I'm sitting on some gold/precious metals. I've kind of temporarily given up on bonds, no idea why, just haven't been purchasing/selling them recently.


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## Underworld (Aug 26, 2009)

I only have a few thousand in a crappy company RRSP, but i moved it to cash. If i did have any real money to use i would have it in gold for the short term to appreciate whilst people turn to it as currencies errode.

I would hopefully then buy back into the TSX when the dow jones hits 4,500


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## Belguy (May 24, 2010)

A rotten week for stocks!!

I should have sold but now I'm too late.


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## HaroldCrump (Jun 10, 2009)

Belguy said:


> A rotten week for stocks!!
> 
> I should have sold but now I'm too late.


Should have sold exactly 2 years ago


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## Belguy (May 24, 2010)

The long term outlook for stocks is very positive.

However, sadly, I will be dead by then!!


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## PMREdmonton (Apr 6, 2009)

I haven't put much in lately.

I'm in a fairly conservative asset allocation right now:

15% cash
50% bonds
10% REIT fund
25% equities

I'm still hoping for about a 30% correction and then I'll add some more money into the pot. P/E10 is still not very favourable and I am waiting for the stock market to price in an upcoming recession.


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## Brad911 (Apr 19, 2009)

All I've done this year is DCA into existing positions with cash, my LOC or proceeds from sales of stocks moving past my targeted allocations.

It's super boring dividend investing at its best. I'm earning income that I can put towards buying more shares in a tax efficient way and just slowing gaining ground one share at a time.

This is an environment where investing is tough psychologically because you FEEL like you should be doing more. Investors often tamper with their portfolios (switching stocks, buy, selling, etc) simply because they feel like they need to turnover something to be productive.

This is when an investor, IMO, is most productive; when you stick to your plan and profit from patience.


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## Sampson (Apr 3, 2009)

Brad911 said:


> This is when an investors, IMO, is most productive; when you stick to your plan and profit from patience.


+1. Agreed.


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## Belguy (May 24, 2010)

During the last crash, I was thankful for my 40 percent bond allocation as it saved me from a bigger drop in my portfolio. However, the prospect of another steep decline in equities doesn't fill me with the same confidence in bonds. Now, I am hearing and reading a lot about the possibility of significant drops in bond yields as interest rates start to rise.

And so, what rudder do we use to stay afloat in the potentially rough seas ahead--cash or GIC's?

Some are suggesting that we face "several years" of anemic returns for stocks as the economy struggles along with little prospect for a meaningful recovery for quite some time to come.

Where should we place our confidence if not in equities and/or bonds?

We have just experience a single week where stock markets have declined about 5 percent in value!!

What's in store for the weeks and months ahead?????


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## kcowan (Jul 1, 2010)

Belguy said:


> ...
> What's in store for the weeks and months ahead?????


Ask a question like that and you will get a range of answers. Ask me what the future holds? Beats me!

But here is what I am counting on. I think long bonds might go down in market value by 10% in the next year. Equities probably have a bit further to go down, maybe another 20%-30%, although they have already corrected part way down.

My thinking is that rising interest rates will force long bonds down to remain competitive but more than a 10% correction is unlikely.

Equities are tougher to call but the economy is slowing down right now and eventually the prices willl have to reflect the reduced revenues.

I still hold some individual growth stocks but they are currently a small percent of my overall holdings. I sat out most of the rebound during the last 16 months. But it was lost oportunity not lost portfolio value.


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## heyjude (May 16, 2009)

I voted Cash. My portfolio is very diversified and I'm glad to have a buffer against the slings and arrows of outrageous fortune. I am maintaining my current positions in equities, bonds, preferred shares, precious metals, venture capital and real estate, but I am putting new savings into cash. I'm just not brave enough to assume that equity returns will ever get back to where they were a decade ago. And I am going to need some of that cash over the next few years. I will wait till the next interest rate hike and then biuld a GIC ladder that includes the best 5 year GIC I can find.


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## Belguy (May 24, 2010)

I was just looking at a chart of how the S&P/TSX Composite Index has been performing. Basically, after last week, it is back to where it was last July and so we have had an entire year with no growth in this index.

As for the S&P 500 Index, it is down 8.30% YTD and the iShares Index ETF has a negative 3.06% return over the past FIVE years as of May 31.

The GIC investors win again!!!


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## HaroldCrump (Jun 10, 2009)

Belguy said:


> I was just looking at a chart of how the S&P/TSX Composite Index has been performing. Basically, after last week, it is back to where it was last July and so we have had an entire year with no growth in this index.


You should count the dividends though.
A lot of the S&P TSX companies are solid dividend payers.


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## Belguy (May 24, 2010)

I was watching 'Moneytalk' on BNN and the TD economist on there stated the obvious that there is a tremendous amount of uncertainty in the world today, both economic and otherwise, and that stock markets dislike uncertainty.

He echoed what I have heard elsewhere--that we are facing "several years" of such uncertainty and therefore many years of volatility on the stock markets--both up and down.

Not reassuring for older, buy-and-hold investors.


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## PMREdmonton (Apr 6, 2009)

I guess I am actually investing all my money into paying off my Line of Credit presently. I am down to the last $22K again. I was close to retiring it but bought a used car on it and finished off the basement in the house so that set me back a bit.


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## Brad911 (Apr 19, 2009)

*Consistent cash-flow from an unexpected corner*

Good article today in the G&M discussing the investment process of David Driscoll; a favourite value investor of mine and dividend investor. Really liked this quote that was relevant to what I was discussing today in an *article* I wrote on my blog, 

_"You don’t have to trade actively to make money."_

Something I think a lot of investors overlook in this current market. You don't have to turnover your portfolio to be productive. If anything doing nothing is doing something worthwhile as dividends help to compound your returns.


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## james_57 (Jul 5, 2010)

Hello, new-comer here. Here's my 2 cents: there's a time to buy and a time to sell. And then there's wealth accumulation. Its time to be in cash right now, my very strong feeling. 

I think the US is headed into a round of price-deflation, CPI falling etc. They are at 21% real unemployment (or higher) and US RE prices are going to come down, down, down, as inventories wash thru the system, over a year or two, or even three. Meanwhile the USG will continue to print and battle plummeting consumer demand and be awash in bad mortgage paper, with nowhere to turn for a demand. 

There is a tri-currency war going on, between the three blocks. Eastern Europe is in even worse shambles, and no one is talking about it because of the PIGS crisis. 

USD is starting to climb, like it did last time the market dropped. Earnings are said to be bright, yet factory orders have dropped. Lumber has crashed, along with US housing starts. Bond yields are collapsing. The writing is all over the wall, some of it blinking florescent red, that we are on the eve of asset deflation, where cash will be king.

In spite of that, gold continues to monetize, and is at a dip as the global financial crisis gathers steam. The question now is how far will the market correct down. No body can know, its all a guess as to where it bottoms. And how high will USD be driven up? That uncertainty values a cash position highly.


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## Belguy (May 24, 2010)

And so, putting all of that aside for a moment, what is the GOOD news???


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## Ben (Apr 3, 2009)

Still taking 10% off the paycheque into the old Couch Potato. I'll admit to being slightly pessimistic about the state of world financial affairs, but don't know that I can come up with a better concept than buy-and-hold. 

To be honest, at this early point in my investing career, the best thing that could happen is a total market crash followed by a lengthy sluggish period in the doldrums just after my mortgage is eliminated and massive amounts of cash become available for investing.

All monthly net cashflow is currently going to mortgage reduction. Good progress is being made on that front, and the ROI is steady, guaranteed and reasonable.


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## Belguy (May 24, 2010)

Ah, to be a young investor again!! That long time line can sure let you sleep better at night in the face of all of the economic doom and gloom that is out there now.

U.S. and International Indexes have not performed well over many years now and I don't see much on the horizon that is likely to change that scenario any time soon.

With investing, so much seems to come down to luck and timing.

Maybe the next generation will have better luck and timing than that of some of today's older, buy-and-hold index investors.


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## james_57 (Jul 5, 2010)

Belguy said:


> And so, putting all of that aside for a moment, what is the GOOD news???


We are not in a major war, yet.


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## james_57 (Jul 5, 2010)

Belguy said:


> With investing, so much seems to come down to luck and timing.
> 
> Maybe the next generation will have better luck and timing than that of some of today's older, buy-and-hold index investors.


In my view, its like the time honoured aphorism, _it's not what you make it's what you keep_. And buying anything investment related is the 'keep' part, even if its in a saving account (or maybe especially when). If your stash, that which you have squirreled away can grow on its own, so much the better. 

I view the market as a very complex betting game, where the mood of the market swings as if at a ball game, especially when it heats up. Its partly rigged, and can be gamed, and is gamed. Nevertheless its irresistible especially when its volatile, when fortunes are made and lost. 

Right now the market is very schizophrenic, reflecting how we the masses feel about the future, as we cannot see very far ahead with any confidence whatsoever, its like driving in a blinding snow storm. 

I think the next generation will need to contend with a world much different that we all have known, save the 90 year-old's among us. 

this world


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## osc (Oct 17, 2009)

Cash is more a neutral position than a bearish one. I think being in cash does not really mean you're investing, it means you are afraid to invest/trade. 
An active neutral position is selling near-term OTM calls or puts, or both. 
An active bearish position would be to short stocks/indexes or to buy puts. Or to enter long in something inversely correlated with the stock market (like some commodities or gold).


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## james_57 (Jul 5, 2010)

osc said:


> Cash is more a neutral position than a bearish one. I think being in cash does not really mean you're investing, it means you are afraid to invest/trade.
> An active neutral position is selling near-term OTM calls or puts, or both.
> An active bearish position would be to short stocks/indexes or to buy puts. Or to enter long in something inversely correlated with the stock market (like some commodities or gold).


If i were working my portfolio as a day trader, i might agree. However you are still betting, and to classify the state of cash in a savings account as non-productive when its about one point and a half behind Royal Bank stock yields for example, with none of the risk, is perhaps splitting hairs. When all the risk indicators are pointing due south, logic dictates cash is a safer bet. I went to 70% cash, bonds (and metal) in June, trimming all but core equities, because in my view it looks like a strong headwind for all market classes, being as they are priced on future earnings. The buy-and-hold crowd, i assume have a depressionary cycle figured in, at least with some degree of probability. 

I don't see a good counter argument to being out of the market right now (options trading or otherwise) unless its an improving jobs picture in the US. On the other hand, we are on the slippery slope of a deflationary economy (its collapsing very fast down south). So my biggest question now, being a forward thinking investor is where to park the cash meanwhile? In cash or in debt? Dept is very tempting. But the DJIA at 7500 might also be. 

On a side note, i'm pretty sure i have gold figured out (by not reading the gold bug blogs), and i think it a good buy any time up to $2,400, which i calculated at its approx current real value, by my own spread sheet. But then i am partial to gold for its intrinsic value.


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## CanadianCapitalist (Mar 31, 2009)

james_57 said:


> I don't see a good counter argument to being out of the market right now (options trading or otherwise) unless its an improving jobs picture in the US. On the other hand, we are on the slippery slope of a deflationary economy (its collapsing very fast down south). So my biggest question now, being a forward thinking investor is where to park the cash meanwhile? In cash or in debt? Dept is very tempting. But the DJIA at 7500 might also be.
> 
> On a side note, i'm pretty sure i have gold figured out (by not reading the gold bug blogs), and i think it a good buy any time up to $2,400, which i calculated at its approx current real value, by my own spread sheet. But then i am partial to gold for its intrinsic value.


I can supply one for you. What makes you think the market is underestimating the risks you mention? Because, the only way to make market-beating profits is to identify trends the market is mispricing and make bets on it. IMO, deflation, poor jobs picture etc. is already headline stuff and is baked into the price. Why do you think the market is mispricing these risks?


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## Mike59 (May 22, 2010)

james_57 said:


> I went to 70% cash, bonds (and metal) in June, trimming all but core equities
> ...
> On a side note, i'm pretty sure i have gold figured out (by not reading the gold bug blogs), and i think it a good buy any time up to $2,400


Your allocation is right on with what I am working toward...

I'm currently at 10% metal (in precious metal mutual fund), and believe the Dow/gold ratio will continue toward 1:1. 

May I ask what percentage of your total portfolio you dedicate to metals? Many of my trusted gold gurus (Peter Schiff especially) go as high as 20%+ but my stomach isn't strong enough just yet to make such a move...It's interesting to hear what other gold bugs are doing


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## Mike59 (May 22, 2010)

CanadianCapitalist said:


> I can supply one for you. What makes you think the market is underestimating the risks you mention? Because, the only way to make market-beating profits is to identify trends the market is mispricing and make bets on it. IMO, deflation, poor jobs picture etc. is already headline stuff and is baked into the price. Why do you think the market is mispricing these risks?


The 200 day average, the price of gold, and the debt:GDP ratios argue that the natural momentum is being masked by talking heads, and essentially mispriced.

Despite the negative trends being "headline", the true severity of this problem is being minimized by government manipulation of employment numbers, interest rates and stimulus spending/bailouts. I have no doubt that the current ups/downs (i.e. rise of the Euro this week) are reflections of how ignorant most are to the money supply, the national debt (in both USA and Canada) and how bad things actually are worldwide.

The fact that world indices continue their run this high in spite of the "real" unemployment and inflation numbers makes me believe that many investors and those on Wall st. are in a fantasy land...


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## HaroldCrump (Jun 10, 2009)

Mike59 said:


> The fact that world indices continue their run this high in spite of the "real" unemployment and inflation numbers makes me believe that many investors and those on Wall st. are in a fantasy land...


So are there _any_ investing avenues that you'd recommend or are you staying in cash?
If there is hyperinflation, cash will lose its value as well.


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## Mike59 (May 22, 2010)

HaroldCrump said:


> So are there _any_ investing avenues that you'd recommend or are you staying in cash?
> If there is hyperinflation, cash will lose its value as well.


Cash certainly has its disadvantages, which is why I have diversified into real-return bonds and precious metals to combat inflation-risk. I hold no more than 5% cash at anytime given it's poor defense against inflation. Things are obviously in flux and catastrophe hasn't hit yet, but I have found myself pulling out of the market gradually and sinking more into gold/RR bonds with each passing month. 

If hyperinflation takes hold, investing likely wouldn't matter anymore and it becomes a darwinian fight for survival. For this situation it's down to my peanut butter and tuna stockpiles, a generator, some silver bars, and a rifle


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## CanadianCapitalist (Mar 31, 2009)

Mike59 said:


> The 200 day average, the price of gold, and the debt:GDP ratios argue that the natural momentum is being masked by talking heads, and essentially mispriced.
> 
> Despite the negative trends being "headline", the true severity of this problem is being minimized by government manipulation of employment numbers, interest rates and stimulus spending/bailouts. I have no doubt that the current ups/downs (i.e. rise of the Euro this week) are reflections of how ignorant most are to the money supply, the national debt (in both USA and Canada) and how bad things actually are worldwide.
> 
> The fact that world indices continue their run this high in spite of the "real" unemployment and inflation numbers makes me believe that many investors and those on Wall st. are in a fantasy land...


It's not clear to me what your argument is. Are you saying that inflation is a threat that the market is ignoring. If so, your opinion is in direct contrast to the poster I was responding to, who is holding cash because he is worried about deflation.


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## james_57 (Jul 5, 2010)

CanadianCapitalist said:


> I can supply one for you. What makes you think the market is underestimating the risks you mention? Because, the only way to make market-beating profits is to identify trends the market is mispricing and make bets on it. IMO, deflation, poor jobs picture etc. is already headline stuff and is baked into the price. Why do you think the market is mispricing these risks?



Its not hard to argue that the market failed to correctly identify the crash of 2008 coming, otherwise so many people would not have lost 50% of their portfolio assets (as the people _are_ the market) in such dramatic fashion. The world's top economists, who mostly seem to work for financial institutions, did not see 2008 coming, and these are the same people advising policy makers now on the cure. 

The other answer is, i think the markets are behaving irrationally. For example, why would BP rise 8 points based on the idea that the GOM oil disaster damage is quantifiable? (when it is clearly not). 

For another example, i'll quote a BMO economist on the CBC news 4 weeks ago who said (paraphrasing) '_ Canadians are going to have to adjust to the (new) reality that consumption is no longer going to be the main driver of the US economy going forward'_ .

I find myself in agreement with the above noted economist, but try as i may, i can't think of what will replace consumption as the main driver. Can anyone? Its not going to be manufacturing any time soon. My conclusion is that the market does not have an answer for this problem, and is buying into the idea that it will sort itself out going forward. I think the bulk of the market today is only looking 3 months ahead.


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## Mike59 (May 22, 2010)

CanadianCapitalist said:


> It's not clear to me what your argument is. Are you saying that inflation is a threat that the market is ignoring. If so, your opinion is in direct contrast to the poster I was responding to, who is holding cash because he is worried about deflation.


I foresee both deflation (we are likely in the beginning now), followed by a sudden phase of inflation. Regardless of which phase we're in, it's a bad time to be invested, which is the point I made in line with James_57's opinion. 

The markets are being held back temporarily from larger, more catastrophic corrections. Most investors are being misled by their advisors and government about the big picture.


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## CanadianCapitalist (Mar 31, 2009)

james_57 said:


> Its not hard to argue that the market failed to correctly identify the crash of 2008 coming, otherwise so many people would not have lost 50% of their portfolio assets (as the people _are_ the market) in such dramatic fashion. The world's top economists, who mostly seem to work for financial institutions, did not see 2008 coming, and these are the same people advising policy makers now on the cure.
> 
> The other answer is, i think the markets are behaving irrationally. For example, why would BP rise 8 points based on the idea that the GOM oil disaster damage is quantifiable? (when it is clearly not).
> 
> ...


I did not say that the markets perfectly price everything. Of course, it doesn't. Otherwise, a guy like Warren Buffett wouldn't exist. Yes, most investors and economists did not foresee the depth of the stock market decline. But some did. And as documented in _The Big Short_, a handful of investors made truckloads of money. They did it by identifying risks the markets were ignoring. Every risk mentioned in this thread is already in the front pages. The markets are discounting it. I don't see a case here for why the market is wrong.


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## james_57 (Jul 5, 2010)

Mike59 said:


> Your allocation is right on with what I am working toward...
> 
> I'm currently at 10% metal (in precious metal mutual fund), and believe the Dow/gold ratio will continue toward 1:1.
> 
> May I ask what percentage of your total portfolio you dedicate to metals? Many of my trusted gold gurus (Peter Schiff especially) go as high as 20%+ but my stomach isn't strong enough just yet to make such a move...It's interesting to hear what other gold bugs are doing


Percentage-wise i am about 10% (just less than) however, i buy gold for other reasons than what is probably the norm. To explain, i treat gold as a way to lock in my wealth (think forced savings). I do not buy it to sell, and i buy physical only, i don't consider paper-gold as 'gold'. Schiff is a great cheerleader for gold, but i wonder how much he really understands gold. Owning gold has become a fad again. I recall the inflationary cycle of 1978-80 when gold took off, and people were emptying pop machines just to get at the real silver coins. Most people don't really understand gold and its place in society. For example, even Max Keiser is offering '28 grams' of gold as a prize on his website. (Troy oz =31.1gm). 

My view is that gold is in the process of monetizing (again), which is a role it has played throughout human history. 

I look at this chart  as reflecting the purchasing power of USD as measured by a gold standard. ( a relative perspective). Using a case example, my father worked for about $100/mo in 1935. Under the US Gold Reserve Act the value of the dollar was fixed at $35 per ounce for the same period. One month of dad's wages in '35 would buy about 3 ounces of gold. Were my father alive today, a man in his job as a factory engineer would be making about $5,000/mo; and could purchase about four ounces of gold today with a month's wages. So gold at $1200 is not far off its 1935 value, relative to the purchasing power of my father's income. If we factor in that wages have lost ground over the past 20 years, relative to inflation, it could be argued that gold, if fully monetised, should be valued higher relative to the purchasing power of a dollar. (i argue that value is about $2400), in other words, taking the long view, gold is under priced historically.

PS: in '35 my mother was buying 2lbs of hamburger for 25C (i just asked her). Go figure..


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## james_57 (Jul 5, 2010)

CanadianCapitalist said:


> I did not say that the markets perfectly price everything. Of course, it doesn't. Otherwise, a guy like Warren Buffett wouldn't exist. Yes, most investors and economists did not foresee the depth of the stock market decline. But some did. And as documented in _The Big Short_, a handful of investors made truckloads of money. They did it by identifying risks the markets were ignoring. Every risk mentioned in this thread is already in the front pages. The markets are discounting it. I don't see a case here for why the market is wrong.


Agreed, a handful of investors made money in shorts by identifying risks that markets were ignoring; the average income to house price ratio, being one such relationship that was way out of whack in 2007 (and still is). You seem to support my point with that statement. 

You go on to say, "_Every risk mentioned in this thread is already in the front pages."_ and suggest its different this time round, because the risks are more in the media spotlight, therefore the hazards are priced-in.

My counter argument is that there are many professional money managers who have gone to cash aggressively in the last month, (profit taking as well) and that trend is part of the upward pressure we see on USD. Agree so far? Those in this camp (my pedestrian self included) are sitting on cash, low in risk, for a rational reason, and we form part of the market. This component of the market is expecting the next leg down, and hence that group's behaviour is affecting both the upward trend in T-bills and the downward trend in the DJIA. 

If it suddenly looks like there is a sustainABLE summer rally occurring, the direction of these flows could turn on a dime. That might be what we see happening today in a very volatile market. I can't speak for others, but i'm not swayed by a 275+ day on the DOW, rather, it makes me think EXTREME VOLATILITY, even more reason to sit back and watch.


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## james_57 (Jul 5, 2010)

CanadianCapitalist said:


> Every risk mentioned in this thread is already in the front pages. The markets are discounting it. I don't see a case here for why the market is wrong.


Here's the other side of the bet, in agreement with you, from the Asian desk of Marketwatch

"Equity markets are bouncing from oversold territory and I think it will continue," said Macquarie Private Wealth Division Director Martin Lakos in Sydney. "There's no doubt that equities were discounting every possible worst case outcome. We are now starting to see some of those concerns unwind, in terms of the stress testing of banks in Europe, U.S. earnings and the U.S. economy."


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## MoneyMaker (Jun 1, 2009)

Great companies have been on sale lately: Walmart, JNJ, Pfizer, Microsoft, Exxon and the list goes on


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## Square Root (Jan 30, 2010)

After reading this thread my conclusions are:as many "opinions" as posters. Nobody knows what to do and just "talk their own book". Time for a workout.


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## Belguy (May 24, 2010)

Buy and hold a diversified portfolio of broad-based index funds and go back to sleep. I guess that it is interesting to try to predict the eb and flow of the markets but the point is that nobody really knows. However, for some of us, it is a hobby.


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## james_57 (Jul 5, 2010)

Priceless: a poster on calculated risk writes:

_".. went to a local bank's shareholders meeting several weeks ago (Southern VA) and in the Q&A with the bank pres, someone asked why the bank was sitting on so much cash. Bank pres' response was that he'd never seen anyone go broke sitting on cash. _"


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## kcowan (Jul 1, 2010)

Looks as if they time to buy in rapidly approaching for contrarians?


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## Belguy (May 24, 2010)

For investors, rising rates are generally a positive sign that the central bank sees data that shows the economy is strengthening and growing again. And, in a growing economy, you should follow your plan and continue to invest with diversification and discipline. This is the formula that has rewarded investors since the market lows of March 2009.

Source: Scotiabank

Conclusion: Watch to see if the central bank raises interest rates another 1/4% the next time out despite all of the doom and gloom out there. If they do, it indicates that they feel that the economy is continuing to expand which is good for stocks.


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## kcowan (Jul 1, 2010)

Belguy said:


> ...Conclusion: Watch to see if the central bank raises interest rates another 1/4% the next time out despite all of the doom and gloom out there. If they do, it indicates that they feel that the economy is continuing to expand which is good for stocks.


I am puzzled.

While this in the common belief, why are the banks dropping their mortgage rates?

OK the GDP might be OK but the housing segment is in trouble. How long before the housing slump reflects itself in the GDP?


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## james_57 (Jul 5, 2010)

kcowan said:


> OK the GDP might be OK but the housing segment is in trouble. How long before the housing slump reflects itself in the GDP?


Why do you say the 'housing segment is in trouble?' Have you ever lived through a period of _real trouble_ in the Canadian RE market? Just wondering. 1980-to-83 comes to mind, and also 1990-92.


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## Belguy (May 24, 2010)

Keith has lived so long that he has seen it all!!!


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## james_57 (Jul 5, 2010)

A quick reality check:

Average annual income of economic family (2010) = $75,000

Average house price Canada (Jan '10) = 329,000

Ratio: 4:1 

Its a bit on the high side, but still a comfortable ratio, and if adjusting for two localized bubbles, its almost dead-center normal.


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## james_57 (Jul 5, 2010)

To continue the comparison with the US market, their average household income for '08 was 52K and the average house price (SOLD) 269K, a ratio of 5:1 

In Jan 01 2007, the US number peaked at $322,000, so its already off its peak by nearly 20%, suggesting the ratio was 6:1 prior to the correction. 

The forecast is for US housing to decrease in the near term. If US RE drops another 20%, it will be more in line with Canada's ratio of 4:1


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## HaroldCrump (Jun 10, 2009)

Belguy said:


> For investors, rising rates are generally a positive sign that the central bank sees data that shows the economy is strengthening and growing again. And, in a growing economy, you should follow your plan and continue to invest with diversification and discipline. This is the formula that has rewarded investors since the market lows of March 2009.
> 
> Source: Scotiabank
> 
> Conclusion: Watch to see if the central bank raises interest rates another 1/4% the next time out despite all of the doom and gloom out there. If they do, it indicates that they feel that the economy is continuing to expand which is good for stocks.


Not necessarily 
It is possible, and has indeed happened many times in recent history of many countries including Canada, that interest rates rise _without_ real GDP growth.
It is a state of stagflation.
Several variables that theoretically can cause stagflation are present today - very high fiscal stimulus, heavy deficit financing, high unemployment, etc.
Whether stagflation rears its ugly head or not remains to be seen.

So do not construe a rise in central bank lending rate as a sign of economic recovery.
It could very well mean the opposite forces are already in motion.



kcowan said:


> I am puzzled.
> 
> While this in the common belief, why are the banks dropping their mortgage rates?


Maybe because 5 year bond rates have fallen slightly lower.


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## james_57 (Jul 5, 2010)

HaroldCrump said:


> So do not construe a rise in central bank lending rate as a sign of economic recovery.
> It could very well mean the opposite forces are already in motion.


Ditto, with pitched organ music, rising in background.


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## kcowan (Jul 1, 2010)

james_57 said:


> Why do you say the 'housing segment is in trouble?' Have you ever lived through a period of _real trouble_ in the Canadian RE market? Just wondering. 1980-to-83 comes to mind, and also 1990-92.


Yup I was moving from Edmonton to Toronto in 1981 and carried bridge financing of $250K when rates hit 22%. I rode the Toronto slump from 1990 to 1997 (and my house price dropped from $1050k to $535k). I moved to Vancouver in 1995 but did not unload my Toronto house until 1997. We are renting here in Vancouver because of the insane valuations.


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## james_57 (Jul 5, 2010)

kcowan said:


> Yup I was moving from Edmonton to Toronto in 1981 and carried bridge financing of $250K when rates hit 22%. I rode the Toronto slump from 1990 to 1997 (and my house price dropped from $1050k to $535k). I moved to Vancouver in 1995 but did not unload my Toronto house until 1997. We are renting here in Vancouver because of the insane valuations.


i've lived in the same three cities as well, and approx, thru the same cycles, although, seems you missed Vancouver in the mid-70's, when the NDP wrecked the economy..that was fun. My experience in Vancouver, is that one should only buy (if one must) at the bottom of the crash, and Vancouver RE crashes are like buses, if you missed one, just catch the next. 

Why do you say Canadian RE is in trouble? It looks pretty normal to me, (excluding the Van area lower mainland, which i never count as normal, by any stretch) although i haven't really looked under the hood lately. Are you suggesting that rates are going to take off? I can't imagine that.. I see that sales are dropping like a stone in a couple of cities, but that's not out-of-character with the scenario at large.


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## james_57 (Jul 5, 2010)

This line in the article by David Weidner, MarketWatch sums up the current rally perfectly IMHO

"_Not only does the emperor have no clothes, no one in the kingdom cares." _

'_Wall Street banks and brokerages are readying second-quarter numbers for mass digestion. They'll show healthy balance sheets, tolerable risk levels and have all the trappings of well-run companies.

Don't believe a word of it. '_


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## kcowan (Jul 1, 2010)

james_57 said:


> ...Why do you say Canadian RE is in trouble? It looks pretty normal to me, (excluding the Van area lower mainland, which i never count as normal, by any stretch) although i haven't really looked under the hood lately. Are you suggesting that rates are going to take off? I can't imagine that.. I see that sales are dropping like a stone in a couple of cities, but that's not out-of-character with the scenario at large.


I am just cautious that Vancouver and Toronto have been increasing for over ten years at a rate that is significantly beyond inflation. So there will be a correction. It might be a long sideways period where the values do not keep up with inflation. We see both Ednonton and Calgary in their second year of corrections. But I am no longer familiar with those markets.


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## james_57 (Jul 5, 2010)

kcowan said:


> I am just cautious that Vancouver and Toronto have been increasing for over ten years at a rate that is significantly beyond inflation. So there will be a correction. It might be a long sideways period where the values do not keep up with inflation. We see both Ednonton and Calgary in their second year of corrections. But I am no longer familiar with those markets.


One thing about the future, none of us are experts at predicting it. Nevertheless, we all know a correction to those markets is over due, at least by historical standards. I think you are doing the perfect thing, enjoying life in a carefree rental situ, in one of the best environments in the world. I've had a couple of penthouse apts in Van., and the last time round my friends from NYC visited a couple times, and they were simply in awe of the location verses the price i was paying. In NYC the same apt would cost 5k to 8K a month. (i was paying $2K, that was 10 years ago). By that yardstick, Vancouver is a super deal!

Have you thought about where you are going to retire? If its BC, you can always have fun window shopping, looking for deals.


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## osc (Oct 17, 2009)

james_57 said:


> I think you are doing the perfect thing, enjoying life in a carefree rental situ, in one of the best environments in the world. I've had a couple of penthouse apts in Van., and the last time round my friends from NYC visited a couple times, and they were simply in awe of the location verses the price i was paying. In NYC the same apt would cost 5k to 8K a month. (i was paying $2K, that was 10 years ago). By that yardstick, Vancouver is a super deal!


If it was $2k 10 years ago, now it's between $5k to $8k. Living close by, I think Vancouver is one of the worst cities in Canada for a non-rich person to live in these days, especially if he wants to ever retire. The mortgage will eat your life away. And it rains all the time.


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## james_57 (Jul 5, 2010)

osc said:


> And it rains all the time.


Have you ever been to Prince Rupert.. now there it really does rain all the time. I was working up there one summer into the fall, logging. It rained every day. I remember one afternoon in Oct., when the sun came out for an hour, it hurt the eyes.. lol. 

Vancouverites must clear out in the winter, to preserve sanity. Go to Whistler, Mexico, Costa Rica, Caribbean, any darn place, and return in Feb. I recall one Nov it rained 30 days straight, a month of being cold dark and drenched. You don't forget months like that.


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## kcowan (Jul 1, 2010)

Actually I think Vancouver is "the best place on earth" to live in the summer. Moderate temperature and low humidity. I rent 3300 sq.ft for $1/sq.ft. and sublet in the winter months to a lawyer friend for $2k/mo.

In the future we might choose to downsize, after all, 3300 sq.ft. is a bit much for 2 adults and 2 cats! But we will watch the market. We thought the market was overpriced in 1997 compared to rental and now it really is!

(I worked for a summer in Holberg on the island and they kept threatening that it was going to rain. From May 1st to August 15th, it was sunny every day. Then the clouds moved on blotting out the sun and the mountains. The only thing that kept me sane for the last month was working on the mountan-top at the radar site every day and often being above the clouds.)


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## Belguy (May 24, 2010)

B.C. forecast for the next few days calls for mostly showers with scattered earthquakes.


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## james_57 (Jul 5, 2010)

A piece on the Buy and Hold strategy and how things have changed.

Buy and hold gets old
Market-timing strategies score big with tense investors

Excerpt:

_To trend followers, the notion of buy-and-hold investing -- picking stocks based on fundamentals and keeping the investments for months or years -- has no place in today's market and in fact is a recipe for defeat.

"You have to understand the game you're playing -- you're playing with sharks," said Kenny Landgraf, president of Austin, Texas-based, Kenjol Capital Management. "You may believe in buy-and-hold, but there are large players out there that don't." _


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## Belguy (May 24, 2010)

And so you become a market timer. Good luck with that as well!!!

Maybe the stock markets are only for the pros after all. The odds are stacked against the individual investor.

On the other hand, you can always get lucky. You could also win the lottery.

We live in uncertain times and the markets don't like uncertainty.

Good luck!! You'll likely need it.


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## james_57 (Jul 5, 2010)

Belguy said:


> And so you become a market timer. Good luck with that as well!!!
> Maybe the stock markets are only for the pros after all. The odds are stacked against the individual investor.
> On the other hand, you can always get lucky. You could also win the lottery.
> We live in uncertain times and the markets don't like uncertainty.
> Good luck!! You'll likely need it.



Belguy, the take-away from that article i thought was that the buy-and-hold strategy is not controlling the pulse of the market these days, instead there are huge assets in the market that are playing the trends, managed by professionals using sophisticated strategies. They don't care if it moves up or down, as long as it moves. 

I'm sitting with a 65% cash position, and like everyone heavy in cash, waiting to see how far this bear leg will go. I'm not a trader. I'm a buy-and-hold type, who thinks its perfectly fine to be heavy in cash when the market's barometer is plunging (like now). Over the past cycle i got the highs and lows approximately correct, coming thru with a respectable gain, so i can afford to be a bit high-risk with some of the portfolio, such as buying BP in the mid '30's. (i flipped a coin). 

Also, let me say that liquidating half the equities portfolio in the first wk of Oct. '08, and then sitting with cash watching wide-eyed as the market dropped like a rock, giving up 40% of its value in 6 months left a big impression on me. It was a very good feeling, sort of like almost getting run over by a train It broke me free of the buy-and-hold straight-jacket I guess.


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## Belguy (May 24, 2010)

Is it too late to sell?


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## james_57 (Jul 5, 2010)

Belguy said:


> Is it too late to sell?


reminds me of that line in butch cassidy, 

KID: I can't swim!
BUTCH: Don't worry, the fall will kill ya.


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## james_57 (Jul 5, 2010)

Interesting afternoon in the markets. 



Markets Tank Instantly On Bernanke Testimony


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## Belguy (May 24, 2010)

Basically, the markets seem to tank on any tidbit of bad news from anywhere.

Tomorrow, it will probably be because somebody hiccuped in Swaziland.


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## james_57 (Jul 5, 2010)

Belguy said:


> Basically, the markets seem to tank on any tidbit of bad news from anywhere.
> 
> Tomorrow, it will probably be because somebody hiccuped in Swaziland.


It might be Swaziland but it certainly won't be Switzerland.. check this out =>

_Switzerland’s budget deficit is just 1pc of GDP; gross public debt is 40pc; the current account surplus is 9pc; unemployment is 3.9pc. Above all, the eight million Swiss are still world’s unchallenged uber-rich with half a trillion dollars of external assets to back them up. "Whatever the problem, they can cover it," said Mr Bloom. _

source


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## Belguy (May 24, 2010)

Let's find out how the Swiss run their healthcare system and then replicate it!!


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## Berubeland (Sep 6, 2009)

Warrants still warrant

If you put warrants on the poll I'll vote


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## MoneyMaker (Jun 1, 2009)

A lot of quality American large caps are on sale right now.. WMT, XOM, JNJ, etc... good time to load up the shopping bag..

Two articles from 'guru's' confirming same:

General - http://www.gurufocus.com/news.php?id=100675
Bill Miller - http://www.gurufocus.com/news.php?id=100765
Jeremy Grantham - http://www.gurufocus.com/news.php?id=100763
Jeremy Sigel - http://www.gurufocus.com/news.php?id=100873

...

Grantham offers his opinion on this mispricing by the market:

_One is the population profile: there are more new retirees per new worker than there used to be. Retirees are selling stocks to pay the bills and to buy more conservative fixed income investments. And what stocks are they selling? By the time they retire, they probably own blue chips, having sold down most of their speculative stocks in the decade before retirement. This is just a guess; I have no good data to prove it. But it does seem reasonable.

A second candidate, accompanied by stronger circumstantial evidence, is the “Let’s all look like Yale” syndrome. In the last 10 years, institutions and even ultra-rich individuals have, in general, been increasing the share of their portfolios that is invested in private equity and hedge funds, commodities, and real estate. And even within their equities, they have been increasing their share of foreign equities, including emerging markets and small caps. At the second derivative level, hedge funds may feel that they do not get paid to buy Coca-Cola, and private equity firms, particularly now, do not go after many of the great franchise companies. So what is being liquidated to buy all of this new stuff? Old-fashioned blue chip U.S. stocks and U.S. government bonds that used to completely dominate even sophisticated institutional accounts and now no longer do. In the case of U.S. bonds, we have the noble Chinese to step into the breach for a powerful reason: they have no alternative if they want to run trade surpluses. But blue chip stocks are on their own, without any natural offsetting buyers.”_


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## MoneyMaker (Jun 1, 2009)

What a great post on XOM and JNJ:

http://streetcapitalist.com/2010/07/23/more-on-large-cap-stocks/


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## CanadianCapitalist (Mar 31, 2009)

MoneyMaker said:


> A lot of quality American large caps are on sale right now.. WMT, XOM, JNJ, etc... good time to load up the shopping bag..


I agree with the contention that US blue chips are detested by investors these days because they've gone nowhere (or worse) in 10 years. But with every passing year, these stocks are getting cheaper and cheaper (valuation-wise). It seems to me that many of the large blue chips are now priced to deliver high single digit returns -- better than the over all market and much better than bonds.


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## james_57 (Jul 5, 2010)

Belguy said:


> Is it too late to sell?


Belguy, you might be interested in Mish's blog post today. (read with caution)

Bears Go Into Hibernation - Stock Short Sales at 2-Year Low

.


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## Belguy (May 24, 2010)

I didn't sell anything during the 2008 crash and I am not about to sell anything now!!!

I am stubbornly holding on to see if I can make a profit on my portfolio before I go to see my maker!!!


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## james_57 (Jul 5, 2010)

Belguy said:


> I didn't sell anything during the 2008 crash and I am not about to sell anything now!!!
> 
> I am stubbornly holding on to see if I can make a profit on my portfolio before I go to see my maker!!!


Just don't double down..


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