# Could be a foreign ETF bloodbath Friday



## james4beach (Nov 15, 2012)

Consider the following (if the futures tonight are an indication of tomorrow's prices)

UK's FTSE stock index is down 10% tonight. And its currency is down another 8% against USD. That's a one day -18% move in FTSE vs USD. Additionally, Nikkei is down 8% (plus a 3% boost from Yen) so Japan is down around -5% vs USD.

Japan (-5%) and UK (-18%) are the dominant weights in most foreign indices. MSCI EAFE has 43% exposure to those two countries.

I could imagine EFA, VXUS, etc being down 5% to 10% tomorrow... yikes.


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## capricorn (Dec 3, 2013)

good time to buy tomorrow?


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## new dog (Jun 21, 2016)

Good time to buy if you like to trade but I am not so sure about buying and holding.


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## jerryhung (Mar 28, 2011)

not just Foreign, EVERYBODY is down

Japan -8%
SP500 -5%
FTSE/DAX -10%
GBPUSD -10%

UK people is intermediately 10% poorer now

http://ca.investing.com/indices/indices-futures


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## Oldroe (Sep 18, 2009)

For once in your life please be right.

I will listen to 680 news radio today just in case I need to buy.


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## humble_pie (Jun 7, 2009)

what would a poor crumb ever know. But me, i would not buy these days. There is far too much uncertainly hanging over the US. Trump in november would be the final nail in the market coffin.


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## newfoundlander61 (Feb 6, 2011)

I made add more to my Mawer Balanced Fund Maw104 but will stay away from active trading, too risky for my blood.


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## humble_pie (Jun 7, 2009)

they - they being informed pundits, not poor crumbs from the bottoms of sculleries - have said that brexit will trigger a string of euro unravellings. Greece being the next to go.

a young portuguese wife back to visit her family here told me that life in portugal goes on despite euro woes. Schools, hospitals, roads, telecommunications are functioning & stable. Her husband is an electrician. She - being multilingual - works in a call centre in portugal. They have income, their finances are ok, they are middle class typical, she told me.

meanwhile, quality of life - food, culture, music, even clothing & fashion - is great, she told me.

like portugal, britain will muddle through.


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## NextLevelInvesting (Mar 14, 2016)

It will be interesting to see how this unravels. But don't think it will just be the international etfs that will get hurt today (and maybe for a bit).

Since we live in a 'world economy' everything has a ripple affect. This one may start our more as a wave...

On the flip side, it could take Britain up to 2 years to actually leave the European Union and will be interesting to see how they unravel this cats cradle. So the markets could settle down after a bit of a frenzy. 

But, and it's a big but... The markets are overvalued and have been waiting for a trigger to send them tumbling. Is this it? I honestly don't know. 
All I know is that the market rewards the patient investor, so that's what I'll be. 

Keep following your plan whether it's couch potato or more a value style like me. This just creates opportunity for us. And hopefully everything end up OK in Europe.


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## NextLevelInvesting (Mar 14, 2016)

Here's a screen shot of the market right now. 
(from seeking alpha -wall street breakfast)


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## 1980z28 (Mar 4, 2010)

Another buying day


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## james4beach (Nov 15, 2012)

james4beach said:


> I could imagine EFA, VXUS, etc being down 5% to 10% tomorrow... yikes.


Yup, looks like my estimates were right. At 9:48,

US:
EFA -7.1%
VEA -6.8%
VXUS -6.3%

TSX:
XIN -5.7%
XEF -5.8%


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## capricorn (Dec 3, 2013)

market headlines like "30 year low for sterling" seems very disingenuous when as recently as Feb the GBP/USD trading range was in same ballpark as today.
even after trying hard I am not finding anything to buy.
at least till now, this looks no different than any of the other "couple of percentage off days for S&P 500".


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## james4beach (Nov 15, 2012)

I agree, no dramatic opportunities right now. I haven't made any trades.


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## amack081 (Jun 23, 2015)

I got in on some XEF today.


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## TomB19 (Sep 24, 2015)

capricorn said:


> market headlines like "30 year low for sterling" seems very disingenuous when as recently as Feb the GBP/USD trading range was in same ballpark as today.
> even after trying hard I am not finding anything to buy.


What? An nonobjective or uninformed article? :biggrin:

I applaud your optimism. In my opinion, journalists and articles are counter productive to having an objective view on the markets.

My take is: EU will spiral down. CAD will be held down somewhat for a long time. USA will do well on the long term.

When things were melting down in 2009, as bad as it was, people still trusted the US market above others. I expect this will continue to be the case.


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## mars (Mar 11, 2014)

I picked up some CXR on the cheap and then proceeded to write some covered calls for $1.10.


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## mrPPincer (Nov 21, 2011)

capricorn said:


> even after trying hard I am not finding anything to buy.
> at least till now, this looks no different than any of the other "couple of percentage off days for S&P 500".





james4beach said:


> I agree, no dramatic opportunities right now. I haven't made any trades.


I don't see anything jumping out at me either.

Thought I might shift some equity to the EAFE side with e-funds, but I was already high there due to the runup over the last two weeks, so I'll sit and wait for now.

Yesterday would have been the time (for me) to rebalance as it turned out.


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## Spudd (Oct 11, 2011)

Somehow I'm still overweight on my international ETF allocation despite the bloodbath, so I guess I won't be picking up any more.


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## christinad (Apr 30, 2013)

Spudd said:


> Somehow I'm still overweight on my international ETF allocation despite the bloodbath, so I guess I won't be picking up any more.


I was overweight in international equity too so i guess a positive way of looking at it is i don't have to rebalance. I am looking at picking up some xmw low volatily world etf for my tfsa. I was impressed it eeked out a small gain today and i'm looking for less volatility in my tfsa.


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## new dog (Jun 21, 2016)

We will have to see how the market reacts early next week to see if they can contain the problem. Otherwise we could be seeing a banking crisis starting in Europe and it could get very ugly. They will try to keep the market stable to up and try keep gold and silver down. Behind the scenes they will need to pump liquidity and keep the fires out.


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## james4beach (Nov 15, 2012)

With Deutsche Bank down 17% today and Credit Suisse down 16% today, we might already have a banking crisis.

As I've said numerous times on here, I advise reducing exposure to Canadian banks. They are highly leveraged and can't handle market shocks. And yes I put my money where my mouth is -- I am short Royal Bank.


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## new dog (Jun 21, 2016)

Good call on the short I am sure it has been a good day for you. My stocks have also had a very good day, otherwise I am in short term bonds and cash.

I don't think the people here though appreciate the risk to the banks and their portfolio. If the Fed and central banks are unable or unwilling to keep rigging everything then we are in for a huge drop in the stock market.


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## james4beach (Nov 15, 2012)

I agree new dog. Basically since 2009, the S&P 500 has been driven by Federal Reserve stimulus. QE, ZIRP, etc. They've driven the S&P 500 sky high. (This is not just a US phenomenon... it's all western markets).

This works great as long as it continues. But when it stops (for whatever reason, maybe Fed is unwilling to do it, or unable to against the selling pressure) the whole thing could absolutely crater. The danger of market manipulation is that it can't continue forever. Manipulation works to warp prices temporarily, not forever.

Of course many people don't even realize that US/European/Japanese stocks are heavily manipulated, and they think the rally of the last few years is natural and organic.


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## gibor365 (Apr 1, 2011)

> Good call on the short I


 it would be a good call for james to short RY this Thu, and not 3 months ago  .... and this Thu trade would be just roulette ....



> Of course many people don't even realize that US/European/Japanese stocks are heavily manipulated


 everything in our lives is manipulation and you play by their rules ... "don't fight the Feds"  ... and our CAD$ cash is also heavily manipulated currency


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## new dog (Jun 21, 2016)

This is true gibor manipulation has been going on forever. The gold market is almost always contained and the US dollar has been kept in place through Saudi oil and treasury bond deals in the seventies. Since the seventies to today the US military has played a much bigger role in keeping the dollar king. Then you had the 1987 stock crash and the making of the plunge protection team to play a much larger role in maintaining the stock market.

Today or since 2008/09 however the manipulation has gone from one of maintenance to direct manipulation on a daily basis throughout all markets. Before we had a stock market of players that trading freely within boundaries that stopped things from getting out of hand like in 1987. Of course we had criminals that tried to manipulate like they always had done and I am sure the central banks were in there to but not really noticeable.

We are in a hyper-manipulation today that has to be maintained in the gold, forex, bond, PM's, all other commodities to a lesser degree and currencies. Without it banks would fail and real money would have to be forwarded as payment, meaning there could be a time when everything comes to a halt and distribution of goods is stopped. Of course it doesn't have to go this far if some kind of reset deal can be made throughout the world with most countries agreeing to it.

The big problem is the greedy criminals have gone so far that many countries may not want to deal with them on their terms creating a very messy situation. So we will have to see how it all plays out.


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## james4beach (Nov 15, 2012)

Just go look up a chart of S&P 500 plotted against the size of the Fed balance sheet and you'll see right away that Fed stimulus drives the stock market.

And in Japan, the Bank of of Japan explicitly buys a huge amount of common stock index ETFs. The central bank is directly buying stocks!

As new dog points out, this is new... this _did not_ happen before 2009. All of this was to pump stock markets back up after the catastrophic declines.


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## james4beach (Nov 15, 2012)

There's a corollary to this that I should emphasize: if/when the central banks lose control of the stock market, watch out below.

For example Thursday night, the S&P 500 futures went limit down -- hitting the -5% circuit breaker and being halted. This was incredible, an actual crash. The next day, US markets recovered significantly which alleviated that fear.

If you see the US/European markets decline a large % going forward, then it will become apparent that the central banks are no longer in control and no longer able to manipulate stocks higher.

And if *that* happens, we'll have a bear market. Since the 2009-2016 stock move is substantially driven by central bank manipulation upwards, in the absence of that controlling force (i.e. buying pressure), stocks will decline. A lot.

If you are holding stocks long, a buy & hold indexer for instance, you are resting your faith in the ability of central banks to keep manipulating stocks higher. So far, they have done this successfully for a number of years.


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## humble_pie (Jun 7, 2009)

new dog said:


> If the Fed and central banks are unable or unwilling to keep rigging everything then we are in for a huge drop in the stock market.



but this has always been true. When was this ever *not* true?

i suppose those few prophets of the austrian school of economics still have some hope for a real currency. The rest of the world keeps on playing musical chairs.


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## new dog (Jun 21, 2016)

Yes humble pie you are right and I pointed that out in my post above.

But as I and james pointed out above it is the degree of manipulation we have seen since 2009 and have never seen before. If this was the case then we wouldn't have had the stock market declines that we have seen in 2001 and 2008. What we are now seeing is the end game where there is nothing left except hyper-inflation to go to. We have interest rates at zero and QE to infinite it seems and we haven't even seen the real recession that comes along every decade.


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## james4beach (Nov 15, 2012)

humble_pie said:


> When was this ever *not* true?


The level of Federal Reserve & CB intervention in the last few years far exceeds any level in past history. You can see it here in the Federal Reserve's own published graph of All Fed Assets

https://fred.stlouisfed.org/series/WALCL

The current level of the Fed balance sheet is more than 5x the previous steady-state level. *They are going for broke.*

This is a totally new methodology since the 2008 crisis, so don't mistake it for the old usual Fed you were used to in the 90s and 2000s. This is an experiment. It might work out spectacularly well, but I assure you it's not the same as before ... this is new.


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## Oldroe (Sep 18, 2009)

I don't live in fear of the boogie man. Give me 30% correction I know how to make money.

You obviously know nothing about the Canadians banking. Even if your big fear happens and the correction is 90 % the banks will still be there. My house will be 90% less my portfolio will be 90% less and the sun will still come up the next morning.


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## new dog (Jun 21, 2016)

The Boogie man you speak of is reality this is really happening. If something goes wrong and pops the real estate bubble in Canada I don't think this will go over well with Canadian banks besides the enormous systemic risk out there.


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## james4beach (Nov 15, 2012)

Oldroe said:


> Even if your big fear happens and the correction is 90 % the banks will still be there.


I agree, big banks will still be there ... at much reduced equity values. I don't expect any of the big 5 Canadian banks to go bankrupt or disintegrate. I just think their equity values will drop, because they are so highly leveraged.

In contrast, I think the smaller trust-focused banks (like Home Trust, Peoples Trust, etc) might go bankrupt. There is quite a long history of mortgage-focused trusts of this nature failing; just see the CDIC's list on their web site.


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## new dog (Jun 21, 2016)

James the banks will still be there but how long would it take to recover? Will there be dividends? In other words you could be holding dead money for a very long time unless you trade them. We have been conditioned to think banks will go up forever and you can never go wrong owning them. The same thing can be said for the housing market and it sure seems to be true here in Vancouver. In fact if central banks really go all in hyper-inflation style then home and stock prices could go through the roof although it will just be following the opposite direction of the currency devaluation.

We are moving toward a repricing of everything and it might not be what we are conditioned to think they are.


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## Oldroe (Sep 18, 2009)

Again your fear could happen.

Put if the banks are broke or down 90%. Your stuff is down 90% or broke. Now lets see what will pull us out this disaster.

Ah yes the banks. My div might get cut to 1% yours good luck.

My million might be worth 200k put your yz3 etf it will be worth nothing.


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## TomB19 (Sep 24, 2015)

It would appear the bloodbath has barely supplied enough blood for a blood sugar analysis.


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## james4beach (Nov 15, 2012)

What do you guys think, is it back to a full-on bull market now? Was that a "buy the dip" scenario?


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## Beaver101 (Nov 14, 2011)

^ Do you want head or do you want tail? Alas, the flip-a-coin can tell!


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## bumblebee (Jan 15, 2015)

you snooze you lose


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## Oldroe (Sep 18, 2009)

Most that would be a buy. Not even close for me.


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## james4beach (Nov 15, 2012)

Beaver101 and bumblebee, so do you think it's a continuation of the bull market or not?

My opinion is that the bull market is over. It may rally a bit, but I don't think there will be any new highs. I think this is it, sideways market at best, and bear market at worst.


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## Video_Frank (Aug 2, 2013)

james4beach said:


> ...do you think it's a continuation of the bull market or not?


The 8 Ball says "Reply hazy, try again".


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## Beaver101 (Nov 14, 2011)

^ LOL! 



> *Beaver101* and bumblebee, so do you think it's a continuation of the bull market or not?
> 
> My opinion is that the bull market is over. It may rally a bit, but I don't think there will be any new highs. I think this is it, sideways market at best, and bear market at worst.


 ... why're you asking an amateur like me this question when you can attempt a Monte Carlo simulation yourself to derive the answer or consult the in-house predicative opinionated options expert(s)?


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## james4beach (Nov 15, 2012)

OK, so I hear that you're saying: you're not sure whether it's a bull market or not.

Fair enough


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## mrPPincer (Nov 21, 2011)

Seems kinda bullish to me, with a little hiccup here and there.

If the brexit didn't trigger a landslide in the markets I don't know what will, maybe a Drumpf win and the inevitable resulting nuclear holocaust would do it?


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## Oldroe (Sep 18, 2009)

Scrap Metal is up 400% because China needs the metal. Bull


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## new dog (Jun 21, 2016)

It seems very bullish as Italian banks are now up for bailouts.

http://www.zerohedge.com/news/2016-...se-italian-bank-bailouts-suggest-not-all-well

I see it on the Financial Times but that link won't work so I had to use zero hedge.

A lot of bad stuff is happening and banks are teetering so I wouldn't be so sure the bull market is back on. However it does seem they will print money and the Fed won't raise rates which they weren't going to any way they were just telling us BS so we would think all is well. The Brexit it turns out was a good excuse for not raising and for any problems going forward that were going to happen anyways.


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## Oldroe (Sep 18, 2009)

Scrap cars where $40/ton in January 2016. The current price is $175/ ton.

85% of our scrap metal goes to China. The only reason the steel company's are paying for scrap metal is they have orders to fill. And that means factory's and construction want product.

Keep sitting on your hands.


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## CPA Candidate (Dec 15, 2013)

I wonder if James gets a nickle every time he predicts a bank failure or uses the acronym ZIRP. I say this because he has written basically the same post 1000 times.

Must be tiring living life seeing catastrophe behind every corner.


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## james4beach (Nov 15, 2012)

CPA - we live in a unique central bank policy environment. This kind of central bank policy has _never_ been attempted before, and we have no idea what the effects will be. I applaud you for your blind faith in this great experiment and continuing to use traditional analysis techniques without taking into account that central bank stimulus has inflated everything, _including earnings_.

Those P/E and cashflow things they teach you at CPA school do not consider that central bank balance sheets have grown into the $ trillions for the first time ever in history. To use lingo you're more familiar with, those are off-balance-sheet effects. To do a proper analysis you need to take them into consideration


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