# Disruptive Change



## tygrus (Mar 13, 2012)

I hold canadian etfs for the most part, but I can't help but think that a lot of the underlying holdings in these etfs could face some serious disruption in a few short years. The etfs are mostly banks, insurance, oil and gas, pipelines, utilities and REITs.

1. Banks - contain risk becuase of the ongoing RE bubble in this country. Even if they can brush that off, new mortgage business is going to be limited for a long time

2. Insurance - I don't know, I see a lot of people living longer and even surviving many medical conditions. There is talk about technologies waiting in the wings to expand lifespan 10%.

3. Oil & Gas - I feel these industries will be under pressure for a long time and $100 oil isn't coming back. Besides opec, solar has really come down in price and you have Tesla and their battery factory ramping up plus increased fuel efficiency. 

4. Pipelines - Northern gateway, KXL, Energy East will never be built and we all know why.

5. Utilities - This an industry that could be very vulnerable. Solar is probably going to start being cheap and efficient enough to go on the roof of your home and generate what you need for your home and car right where its needed, even in northern climates. Lockheed martin just announced a breakthrough in fusion technology.

6. REITs - a lot of this prime retail property is likely to be under pressure from the online model such as amazon. They have a handful of fulfillment warehouses and then deliver to your door from there. They don't need street front presence. if some of the other big anchors like Wal-Mart do the same, the income from REITs could be affected. In addition, the big mall concept has to change too.


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## Just a Guy (Mar 27, 2012)

1) banks make money from a lot more than just mortgages...plus, they'll get money from the government when mortgages go south.

2) with people living longer and healthier, wouldn't that make payouts less and a longer term to collect from people, making them more profitable.

3) oil and gas can be profitable at a lot less than $100/barrel...they just can't be as obscenely profitable. The demand for oil is also increasing despite the new technologies.

4) no new pipelines, makes more demand on existing ones...which means increased profits. 

5) utilities make money off people despite how it's generated. They will profit from the infrastructure required as well as the maintenance.

6) real estate will be crushed with higher interest rates but, being a landlord, I can tell you there is a lot of hidden profit in real estate if you do it properly...not that I've ever been a fan of REITs.


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## cainvest (May 1, 2013)

If you believe the risk in certain sectors is to high then either switch to different markets/sectors or leave equities all together. IMO, all the areas you have listed above have no more risk of failure than they did a decade ago for longer term investing. Also, if you're mostly in CDN etfs, why not expand into a broader market like the S&P500?


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## humble_pie (Jun 7, 2009)

tygrus said:


> I hold canadian etfs for the most part, but I can't help but think that a lot of the underlying holdings in these etfs could face some serious disruption in a few short years. The etfs are mostly banks, insurance, oil and gas, pipelines, utilities and REITs.
> 
> 1. Banks - contain risk becuase of the ongoing RE bubble in this country. Even if they can brush that off, new mortgage business is going to be limited for a long time
> 
> ...




i usually think in terms of probabilities but i'd say the probability is greater than 50% that your view has merit, broadly speaking. Although i'm not near as gloomy on all sectors. I'd say that Keystone will be built, for example.

in this video, a gathering of fund pundits speak your views. The decade-long run in resource & consumer stocks is over, they say. The Bushell lads are among canada's best & brightest. 

http://player.multicastmedia.com/player.php?video_uuid=w2lgn06q


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## Rusty O'Toole (Feb 1, 2012)

So what? If they don't perform to suit you, you can sell them in minutes for a $9.99 commission, or in some cases no commission at all.

Banks especially have an amazing ability to change the rules and squeeze ever more profits out of us turnips. Then again, you never know what company you think is rock solid, will hit the skids tomorrow. And what hopeless loser will turn out to be the buy of the year. Look at Blackberry for an example. Once a hero, then a bum, now turning back into a hero.

Best answer to me, is to keep an eye on things but don't panic until you have something to panic about.


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## heyjude (May 16, 2009)

We are all doomed, doomed I tell you! 

http://www.businessinsider.com/death-of-equities-revisited-2012-8


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## humble_pie (Jun 7, 2009)

^^

jude your link goes to an august 2012 piece that refers to a 1979 businessweek cover story ...

for 2014, i don't think it's disruptive to say that commodities have boomed for a decade, now they'll rest for a bit.

putin (did i see a reference to putin fleeting through you link?) can afford to speak complacently about low energy prices, he's got all those O & G deals with china sewn up until 2018 at the earliest ...


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## heyjude (May 16, 2009)

humble_pie said:


> jude your link goes to an august 2012 piece that refers to a 1979 businessweek cover story ...


I am perfectly aware of that, humble_pie. My point was that past predictions of market catastrophe have not correlated with actual events. Neither have predictions of bull markets. The only think we can predict for sure is that the markets will go up and down and that change will occur.


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## humble_pie (Jun 7, 2009)

^^

nah u said we izz doomed, doomed u told us each:


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## dubmac (Jan 9, 2011)

humble_pie said:


> http://player.multicastmedia.com/player.php?video_uuid=w2lgn06q


 tried to watch this HP, but couldn't connect/play it. not sure why.

From a probability perspective, there will be disruption (it's the rule, not the exception). When I read the post however, it seems to me like your concerns/predictions focus on the the following: 
1. Inflation and the extent to which governments will no longer be able to "bail out" markets. quite a valid concern IMO - if you get time read this interview. http://www.businessinsider.com/jim-rogers-on-oil-russia-investing-mistakes-2014-11, Rogers gives an interesting take on the US as a debtor nation (in the future), and an interesting perspective on Putin (a perspective that I had not considered.)
2. Climate change and the extent to which technology will replace fossil fuels. Energy companies have considerable amounts of $ & tend to "buy" companies that threaten OR they invest in solar etc themselves. http://www.transcanada.com/news-releases-article.html?id=1795126
3. Technology (medical and other) and it's effects. The extent to which more people will live longer, consume more and draw down on the social services network. Valid concerns -but with more people, comes more disease, and more famine! (Thomas Malthus had this one figured out!)


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## cloud dragon (Oct 31, 2014)

tygrus said:


> I hold canadian etfs for the most part, but I can't help but think that a lot of the underlying holdings in these etfs could face some serious disruption in a few short years.


These are sensible concerns. Canadian investors focusing only on their local market are forced to take a lot of sector-specific risk, not just of the permanent disruptive kind, but also exposure to temporary cyclical issues. If you compare to the composition of the global equity index, the Canadian market is very light in information technology, healthcare, industrial and consumer stocks. It's heavy in energy, materials and financials. One obvious answer is to invest a portion of your globally. If you just want an ETF, the Vanguard ex-canada world fund, VXC, would be a good start point.


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## Butters (Apr 20, 2012)

If your points are true, why not try to profit of some of the areas you've mentioned

People living longer - buy medical supply, or some retirement REIT

Oil under pressure - buy solar


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## humble_pie (Jun 7, 2009)

dubmac said:


> tried to watch this HP, but couldn't connect/play it. not sure why.
> 
> From a probability perspective, there will be disruption (it's the rule, not the exception). When I read the post however, it seems to me like your concerns/predictions focus on the the following:
> 1. Inflation and the extent to which governments will no longer be able to "bail out" markets. quite a valid concern IMO - if you get time read this interview. http://www.businessinsider.com/jim-rogers-on-oil-russia-investing-mistakes-2014-11, Rogers gives an interesting take on the US as a debtor nation (in the future), and an interesting perspective on Putin (a perspective that I had not considered.)
> ...



this might work?






it's unnerving how many documents, pdfs even, videos etc will only open in one or 2 browsers, not in the others. This link works fine for me in chrome, idk about other browsers.

in any event you're not missing much. It's long-winded but essentially eric bushell & his team say that the commodity/resource boom of the past decade peaked in march 2011, then slowed because "unconventional monetary policy" did succeed in reaching its goals.

ie the central authorities did manage to ease the world into ultra-low interest rates (high levels of liquidity, meaning there was/is "funding for all") in order to avoid a brutal depression, he says.

the interesting thing is that bushell said this back in 2013, while most folks were still larking higher with oil & even gold stocks.

we know what he means, most of us have been the beneficiaries of the recent 5-year market boom. Bushell adds that although it was hoped in some quarters that emerging markets would take up the slack, as things have turned out this did not happen.

conspicuously, he did not have convincing future investment paths to suggest. As a matter of fact, i've not recently seen anyone who does. We are all stumped together.

thankx very much for your links, i'll be sure to read them!


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## Rusty O'Toole (Feb 1, 2012)

I would be more concerned about the way the Canadian dollar is falling. All your Canadian investments are taking a beating, even the good ones.


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## HaroldCrump (Jun 10, 2009)

Rusty O'Toole said:


> I would be more concerned about the way the Canadian dollar is falling. All your Canadian investments are taking a beating, even the good ones.


OTOH, USD-denominated investments (incl. USD cash) is rising in real value.
Also, Canadian companies that earn revenues in USD$ but report in CAD$ should be doing well.
Which is why diversification outside of the TSX is important.

That aside, IMO, the inflation in cost of living as a result of falling CAD$ is a far bigger threat for most consumers/households than the stock prices.
That is one of the reasons our gas prices have not fallen as much with the falling crude oil and wholesale gasoline prices in the US.


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## hyperdude (Jul 29, 2011)

If you have disruptive changes that worry you, consider either reducing exposure or hedging. Bulk of my investments are individual stocks so this may be slightly easier.

1. Banks - Favour Canadian banks that have higher US and international exposure in case Canadian economy dips. TD/BNS/BMO

3. Oil & Gas - Funny thing about solar... cheaper oil may hurt solar because there is now less incentive to pony up for solar. I think oil will stabilize and solar will eventually become competitive.

4. Pipelines - Assume that the troubled pipelines will not materialize and analyze the affected companies with that assumption in mind. Or hedge by owning rail company stocks.

5. Utilities - I can envision a future where you become 100% self-sufficient using solar panels & battery packs for nights. But I think that's a while away. Gain alternate energy exposure if you are worried about this.

6. REITs - I don't touch REITs mostly because I am worried about this as well.


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## hyperdude (Jul 29, 2011)

Rusty O'Toole said:


> I would be more concerned about the way the Canadian dollar is falling. All your Canadian investments are taking a beating, even the good ones.


More than half of my investments are in USD. Back when USDCAD were par, I bought only USD stocks. Now I only buy CAD stocks. I think the currency ex is too volatile to ignore.


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