# Here's what's going to happen next



## bmoney (Jun 22, 2013)

Possible outcomes:

OPEC will cut production, either individual members will cut voluntarily or OPEC reintroduces production quotas. Oman is the first already prepared to cut 5-10%. Afterwards, oil will violently rebound up to the $40 range and will take the market up.

China could announce another round of stimulus, with a rate cut and further infrastructure spending. Copper is already up on speculation of a Chinese stimulus program, take a look at the relative strength of Teck Resources.

Fed announces no further interest rate hikes. The Federal Reserve will enter into foreign currency swaps to shore up currencies and capital flight. Take a look at the US 10 year rate it's fallen 25 basis points since the start of the year.

If things get bad enough, other countries will participate in global coordinated stimulus spending targeting infrastructure.

This is unlike 2009 where a serious systemic failure occurred, the recent sell off is due to fears over future growth expectations and falling oil prices, the panic is pathetic. I have a feeling this is a normal correction and I have been buying. The stench of fear is reminiscent of 2009, this is qualitatively different. I'm calling for a bounce and buying in anticipation of an event.


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## bmoney (Jun 22, 2013)

called this one, nice bounce since I first posted.


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## bmoney (Jun 22, 2013)

I'm surprised no comments, it's been almost 2 months, no one's willing to give me any credit for calling this play? Hopefully someone other than me made tons of money on this call.


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## bmoney (Jun 22, 2013)

OPEC:

http://www.cnbc.com/2016/03/16/april-oil-freeze-meeting-may-go-ahead-without-iran-report.html

CHINA:

http://www.cnbc.com/2016/02/29/chin...equirement-ratio-by-05-percentage-points.html

FED:

http://www.npr.org/sections/thetwo-...des-to-keep-interest-rates-low-a-while-longer


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## heyjude (May 16, 2009)

Enjoy talking to yourself, eh? 

I don't know why nobody else has joined in. We probably all agreed with your OP.


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## Mukhang pera (Feb 26, 2016)

bmoney said:


> I'm surprised no comments, it's been almost 2 months, no one's willing to give me any credit for calling this play? Hopefully someone other than me made tons of money on this call.


I think it's just that most of us peasants here have been stunned into silence. It is not an unwillingness to give credit. We're just overwhelmed, that's all. But I have recovered my composure sufficient to say:

*Well played, O great and learned one! We stand in awe of your perspicacity!*

Feel better now?


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## spirit (May 9, 2009)

I too think we reached pretty close to the bottom last month.....reinvested a VERY safe gic into another very safe gic but one that plays the market a bit....if it goes up we get 4%...if it goes up higher....we get 4%...still a chicken little I am I am.....cannot go whole hog with my safe money (; I only gambled once in my life and I am still in love with him 35 years later (;


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## dogcom (May 23, 2009)

If the Fed or other central banks don't pump up the market then this rally will end. Your calls were good ones and based on seasonality oil should be going up and I believe lonewolf also made this call as well over the short term and I agreed with him. Also commodities follow and the stock market was ready for a nice bounce.

This market is stimulus only based and if the Fed keeps raising we will see one very large bear market. 

Another thing that has me concerned is if the US is doing so very well then why so many people turning to Donald Trump. If everything was as good as we are being told then it should probably be Jeb vs Hillary as it was scripted to be.


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## gocanada (Jan 3, 2014)

Does anyone use the Shiller P/E, market cap over GDP, or other indicators to determine how fairly the market is valued or change their investment strategy?

http://www.gurufocus.com/stock-market-valuations.php
http://www.gurufocus.com/shiller-PE.php


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## james4beach (Nov 15, 2012)

Yes, I use the Shiller P/E and Shiller's analysis in general. It's a big reason I have minimal stock investments, because the market has been persistently overvalued since the 1990s.

The stock market is not a rational valuation of the economy and corporate growth. It tends to have long periods of over-valuation and under-valuation. The metrics I look at tell me that the US market has been generally over-valued since the 1990s, so I don't feel a big attraction to invest in the US. It's also interesting that when you have a long period of over-valuation, as I think we're in, people eventually forget about valuation and adopt a "must buy it always" viewpoint out of a kind of desperation to have stock exposure, _no matter what._

The investment and banking industry really stokes that desperation, by trying to scare people about inflation and their retirement prospects. So even the well informed people, who in the back of their mind know that the market is over-valued, keep buying it. This activity becomes a norm.

That article I link to points out that investment professionals (such as advisors and analysts) really have no choice but to always endorse being invested. They can't take the "career risk" of sitting out the market for a decade or two. That leads to very interesting psychology and career-driven situations. For instance, Grantham asked a room of thousands of analysts whether the market is over-valued during the dot com bubble. They overwhelmingly agreed the market was over-valued, but at the same time, kept bringing investors into the market to buy more.

The psychology of all of this is very interesting to me. I consider this my advantage; I *CAN* (and do) take that risk. Nobody's breathing down my neck to invest in stocks... other than CMF forum members, who I can easily ignore. People around here call me timid and risk averse, but really I'm making a well informed long term trade; I refuse to over-pay for an asset.


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## gocanada (Jan 3, 2014)

I find the psychology very interesting as well. I personally feel the markets are over valued, and yet continue to put more money in (albeit at a lower rate then I probably would if I felt the markets were under valued). I suppose my "logic" is that it could continue to go higher and higher because, as you said, the markets are not completely rational (although I do think eventually correct themselves around a rational mean).

So where do you put your money? Obviously part of the fear of not investing is if the markets do continue to go up and up, you are actually losing money due to inflation. Or do you have enough confidence that the markets will eventually correct and will reap the rewards then?


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## hboy43 (May 10, 2009)

bmoney said:


> I'm surprised no comments, it's been almost 2 months, no one's willing to give me any credit for calling this play? Hopefully someone other than me made tons of money on this call.


Sorry, don't pay any attention to people making short term predictions, or most long term for that matter. What you see as your skill, I see as your luck.

I am up over a half million dollars the last 5 or 6 weeks though. It has been a stunning ride. Oh, I have not made any money over the last 2 years, but the loss is down substantially - somewhere around TSX performance now. This is how it goes when one concentrates on trying to buy low - dog house long time followed by sunshine eventually. When the sun shines eventually is, like your call, purely a matter of luck.

I have control over what price I pay, I have control over the security I buy, and I have control over my being patient, I have control over my MER, I have control over timing of taxes. When the money comes to poppa is a luck based. The fact that it comes to poppa still has a measure of luck, but then everything about life has a measure of luck. In the long term, with my money, I seem to have a way of being more lucky than most.

hboy43


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## birdman (Feb 12, 2013)

GoCanda I agree. What does one do; invest in minimal rate GIC's that are fully taxed as income or buy high quality divy paying stocks yielding 4.5 to 5%. I think there has to be a balance somewhere and as I don't think we have had rates this low for such a long period perhaps the dividend paying stocks are not overvalued. Yes, if rates go up significantly these stock will fall but as I don't think this will happen I invest a portion of my worth in the market.


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## The_Tosser (Oct 20, 2015)

hboy43 said:


> I am up over a half million dollars the last 5 or 6 weeks though. It has been a stunning ride. Oh, I have not made any money over the last 2 years, but the loss is down substantially...





> ......In the long term, with my money, I seem to have a way of being more lucky than most.



lmao pure ignorance in action. Summed up nicely in the same post.

Continued cluelessness from the masses.


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## james4beach (Nov 15, 2012)

gocanada said:


> So where do you put your money? Obviously part of the fear of not investing is if the markets do continue to go up and up, you are actually losing money due to inflation. Or do you have enough confidence that the markets will eventually correct and will reap the rewards then?


Good question. Right, so I feel that stocks are broadly overvalued and strongly suspect we're in the latter phase of a very long period of overvaluation... so where do I put money?

The easy answer is that, like anyone who is uncertain and wants to consider their options, I keep lots of cash and short term bonds.

For some higher returns, I also own a reasonable amount in GICs and bonds. Especially 5 year GICs. And I have not "missed out" on much due to this. If you look at the data, the 10 year annualized return from bonds (back in January) was similar to stock returns. The GIC ladder's performance is also going to be in the ballpark of a bonds or corporate bonds.

Unlike others, I am not so worried about inflation for now. I've been tracking my cost of living over the years and many of my costs have been reasonably stable, strongly suggesting to me that inflation is in fact low. I think the official measure of 2% inflation isn't too far from reality.

Under current conditions we're in -- slow/no growth and low inflation (or even deflation) -- I am NOT concerned being heavy in cash, bonds and GICs. It's just not a pressing problem and I have not suffered for avoiding stock exposure.

I'm in my early 30s and am still learning about investments and money. I now recognize the need for a reasonable stock allocation, long term, and I am slowly increasing my stock exposure. At the same time I'm more inclined to follow something like the Permanent Portfolio strategy (25% stocks, 25% treasuries, 25% gold, 25% cash). As I ramp up my stock ownership over the years, I seriously doubt that I'll ever put more than 40% into stocks.


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## james4beach (Nov 15, 2012)

And when I say that I'm happy accumulating cash, bonds and GICs ... consider thoughts from Brian K in another thread, who is now several years into retirement and looking back and reflecting:



Brian K said:


> And I always made more money by saving it, than by my 'shrewd' investments


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## hboy43 (May 10, 2009)

The_Tosser said:


> lmao pure ignorance in action. Summed up nicely in the same post.
> 
> Continued cluelessness from the masses.


Could be, but at 9% PA over 15 years, and not having worked for a wage since 39, it works for me.

You do realise tosser is slang for a masturbator, right? I'll ask again, rude or stupid?


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## dogcom (May 23, 2009)

Hboy43 I believe you said you have a small farm. At the end of the day whether my gold does well or not or your stocks go to zero, you can still eat, if you have the skill and manage it right. This I believe may be the true value you have and I envy you.


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## gocanada (Jan 3, 2014)

@james4beach (or anyone interested), have you looked at all at CAPE numbers by either geography or sector to find markets that are undervalued (at least relative to other markets)? 

I found this pretty good map that shows the CAPEs by geography: http://www.starcapital.de/research/stockmarketvaluation. 

Shiller has a fund (listed as CAPE) that picks some of the most undervalued sectors. Apparently he is looking at doing one by geography as well.


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## Moneytoo (Mar 26, 2014)

james4beach said:


> I'm in my early 30s and am still learning about investments and money. I now recognize the need for a reasonable stock allocation, long term, and I am slowly increasing my stock exposure. At the same time I'm more inclined to follow something like the Permanent Portfolio strategy (25% stocks, 25% treasuries, 25% gold, 25% cash). As I ramp up my stock ownership over the years, I seriously doubt that I'll ever put more than 40% into stocks.


Wow I don't know what would surprise me more - you drinking vodka with gibor or increasing your stock allocation...  What do you think of this article: http://greenspringwealth.com/blog-article/you-are-thinking-about-risk-all-wrong?



> Looking at this data should shift your entire way of thinking about risk. Stocks really aren't that risky if you can hold them for 20+ years. In fact, when you look at them over longer time periods, they are even safer than bonds. For example, Long-Term Government bonds have a standard deviation of 3.51% over rolling 20 years (compared to 3.18% for stocks) and their average 20 year return has been 5.56%, about half that of stocks.
> 
> This is why most people should be holding a decent portion of their portfolio in stocks. As long as they can stomach the year-to-year volatility, their actual risk is quite low when you extend out their holding period.


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## tygrus (Mar 13, 2012)

MT, its not the return on stocks thats the problem, its the stomach churning volatility that happens just about every year now. People cant take that that sort of fluctuation and most eventually break down and exit at the wrong time.


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## londoncalling (Sep 17, 2011)

Those that can't take handle the volatility should go full couch potato with their equity set to an allocation that lets them sleep at night. Some of us enjoy the volatility, buying on dips to juice returns.
I started adding to positions since the fall. Although I am not in the green on all of my portfolio (still feeling the sting from my junior energy plays) I have done well with my purchases of BNS,T, POT(didn't like the cut but I do understand the reasons for it) and CWB. Holding steady on DIV and CU (plus a dividend increase). At some point I will make a move into oil again but not when I can get some steady dividend aristocrats below average prices. I still have some cash to spend just not as much as I did at the start of the year.


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## Moneytoo (Mar 26, 2014)

@tygrus, well, I guess people whom I personally know have stronger stomachs  Just helped out a friend in his 50's who opened a Questrade RRSP account (his other RRSP acct is with the bank, holding equity MFs for ages - and now he decided to try the passive approach) I gave him a link to the Couch Porato model portfolios, he said he doesn't want bonds and asked what I would buy myself. I told him XIC + XAW, at 10/90 ratio, he did some reading - and just bought them. When I told him about those "people" who get scared and sell at the bottom - he laughed and promised not to look at his account till next February when he adds more money (as he does with his other account )


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## Moneytoo (Mar 26, 2014)

londoncalling said:


> Some of us enjoy the volatility, buying on dips to juice returns.


Yep :biggrin:


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## james4beach (Nov 15, 2012)

Moneytoo said:


> Wow I don't know what would surprise me more - you drinking vodka with gibor or increasing your stock allocation...  What do you think of this article: http://greenspringwealth.com/blog-article/you-are-thinking-about-risk-all-wrong?


I agree that stocks don't seem as risky when you hold them long enough, but from the numbers I looked at earlier I think the number is more like 40 years


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## james4beach (Nov 15, 2012)

tygrus said:


> MT, its not the return on stocks thats the problem, its the stomach churning volatility that happens just about every year now. People cant take that that sort of fluctuation and most eventually break down and exit at the wrong time.


Which is why I keep arguing that people need more fixed income than they think. Adding fixed income (or just GICs) to the mix is what dampens the entire portfolio's volatility and therefore helps you stay invested.


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## Moneytoo (Mar 26, 2014)

I think at this point I'd be more afraid of RE insanity than stock market volatility: http://www.greaterfool.ca/2016/03/20/the-little-short ...


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## dogcom (May 23, 2009)

The RE insanity has been going on since before 1997 in Vancouver. I am lucky I bought in 1991 and since then my house has gone up 10 fold and now that I am mortgage free I don't care where the price goes until i retire. However if I had a very large mortgage I would be very afraid but then again that fear would have been the same for the last 20 years.


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## Moneytoo (Mar 26, 2014)

dogcom said:


> ...I am mortgage free I don't care where the price goes until i retire. However if I had a very large mortgage I would be very afraid but then again that fear would have been the same for the last 20 years.


We're mortgage free as well, but I'm wondering what's gonna happen to the economy if people keep buying houses that they can't afford? I'm not hot on bonds now, but even James might rethink his allocations if the interest rates go sub-zero...


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## dogcom (May 23, 2009)

Congrats to you moneytoo, the idea here is to own stuff of value without debt attached to it if you can. We live in a very dangerous world where every investment could be a big problem which includes cash if inflation takes off.

The problem with only owning anything digital in a bank whether it be cash or stocks is the danger of a hacker, power or the government wiping you out. The 80 million stolen from the New York Fed is a good example of the possibilities. 

http://finance.yahoo.com/news/hacke...m-bangladesh-account-at-ny-fed-155946761.html


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