# I'm scared...Could we be heading to another market crash?



## dentist101

Ok, so i've been diligently following the global financial happenings over the past year or so (US debt crisis, Greece default possibility, Eurozone recession possible (PIIGS), China's possible downturn, Canadian housing bubble, Canadian consumer debt crisis, Mark Carney's warnings, US debt default/recession possibility, etc...). Now I don't profess to know alot about macro-economics, or understand how all of this could play out, but I get the feeling that we are possibly heading towards a place that none of us have ever been before (or thought possible). I've been following certain guys blogs (Garth Turner, Canadian Couch Potatoe, etc), and realize that things are at a very interesting point right now. I think that the US is at a place where anything can happen. I don't know what will happen, but I just don't feel that things can continue the way they are going - BOTH IN THE US AND IN CANADA.

In the past, I have been a VERY conservative investor (GICs, T-bills, Bonds, etc...) and therefore have dodged losing ANY $$$ in the economic downturn. Now, I also realize that I have also missed out on some HUGE gains as well. My risk tolerance is quite low tho, so i'm ok with missing out on some losses, as long as I plug along with modest gains. I LOVE TO SLEEP AT NIGHT KNOWING THAT I'M NOT LIKELY TO LOSE MUCH - I'M OKAY WORKING A BIT HARDER TO MAKE MONEY AND MISS OUT ON VOLATILITY.

Just recently (about 2 months ago) I actually entered the market (for the first time) with about half of my RRSPs. I got an investment advisor that I trust who put me into:

· 10% Common Stock (Large size Canadian growth companies such as energy and commodities)
· 15% Dividend Fund (Large size Canadian dividend paying companies such as banks and insurance companies)
· 5% High Income Fund (Mid size Canadian companies that offer attractive dividends such as real estate companies and mining companies)
· 5% Aggressive Equity (Small size Canadian companies that offer large growth potential)
· 10% Global Growth (Large size companies in Europe, Asia and United States)
· 5% Emerging Markets (Companies located in or having large business in emerging markets such as China and Latin America)
· 25% Corporate Bond Funds (Mixture of investment and non-investment grade corporate bonds that offer higher interest rates than traditional bonds or GIC’s).
· 15% Bond Fund (Mixture of government and corporate investment grade bonds only that offer stability but lower returns)
· 10% Money Market (Short term cash like instruments such as Treasury Bills that offer very low returns but are extremely safe.

Now I know that many of you will have very different opinions on my portfolio, but it is what it is. I chose this simply to get me familiar with the markets and get my feet wet.

Here's my question...Are we possibly heading towards another market crash? What advice would you give someone who has a VERY low risk tolerance? What is safe? If I don't care about big gains, what could I do so that I stay in SAFE investments? Should I get out of the markets and hope that interest rates go up?

Here is a bit of background on myself:

Debt: ZERO
Income: + $200,000/year
Home: Renter (VERY CHEAP)
Marital Status: Single
Savings: $150,000 Personal Cash/$150,000 Corporate Cash
RRSPS/TFSAS: ~$190,000 (Half in previous porfolio, Half in GICs)
Net Worth: ~$600,000
Age: 34

I was happy with the fact that I didn't lose any money back a few years ago when the markets crashed. I live a very modest lifestyle and SAVE ALOT. My income will continue to increase every year. I'm hoping for a housing correction in the next few years so I can buy a home with CASH (or a 50-75% downpayment). I HATE DEBT. 

I'm not professing that my way of thinking is the best, but this is who I am. I'm watching my RRSP portfolio drop recently and thinking that maybe I should just pull out and avoid a big drop (and possibly enter back at a later time when things aren't so volatile). 

What do you guys think? i'm nervous...a bit scared. This is brand new to me, and not sure what to do. I listen to people talk about the US/Europe and I seriously think that something is coming. What, I don't know. I don't want to know your opinions on what will happen, I just want to know how to PLAY IT SAFE!!!

Misery loves company, but I don't want to be in any "company"....I want to be alone and safe.


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## dentist101

This is just one of the articles that i've read to make me think that this is a very nervous time:

http://theeconomiccollapseblog.com/archives/stock-prices-have-fallen-for-six-weeks-in-a-row


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## ChrisR

Why do you say that you have "VERY low risk tolerance"? Is there any reason for that statement, other than an emotional attachment to your money?

All of the other facts that you have given us point to a rather high risk tolerance. High income. Long time horizon. Few liabilities. And you expect your already high earning power to increase in the years ahead. You could be a model for high risk tolerance! Now only you can decide how much of a role emotion should play in dictating your overall risk tolerance. After all, they're your emotions, and its your money!

It looks to me as if your adviser does NOT agree with you that you have a very low risk tolerance. The asset mix you have described could best be described as "balanced". ie. Not too risky, not to safe, but somewhere in the middle. 

Now, "are we possibly heading toward another market crash"? Yes. In fact, you can ask that question today, tomorrow, a year from now, or 20 years from now... the answer is always going to be the same. Yes, we are ALWAYS possibly headed for another market crash. Are we more at risk of a market crash right now then usual? No one knows the answer to that question.

I personally think your asset allocation looks great. If the markets tank, you'll feel pain, but not nearly as much as those of us who have decided to go all in on the stock market. If the bull market rages on, you'll share in the wealth creation (but again, not as much as those of us who have chosen to go all in on stocks).

If you want to avoid risk altogether, then your money should be in GICs. However, you'll be committing to mediocre returns in exchange for safety, and the information you've given us doesn't really suggest that is necessary.


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## fatcat

I would suggest that you spend some time reading serious sources of financial information (bloomberg, globeandmail, financial times etc) and make an informed decision on your own.

The blog you reference is part of an industry of biased, permabear, doomsday blogs and websites that tend to sell gold, dried food and ammunition. These are not the best places to use for financial information.

We may be on the edge of a nightmarish meltdown or on the floor of record shattering 25000 bull market.

Nobody knows. Form your own opinion.


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## Cal

Given your risk tolerance as stated, half of your protfolio is in money market and cash, and the other half is in equities....fairly balanced in my opinion, and it seems to be in line with your approach.

The portfolio stated is only half of your TFSA/RRSP money correct? The rest is in GIC's. Which is ultra safe.

The portfolio that you have is fairly balanced, even if the market takes a turn, you seem to have relatively even exposure.

And really if the market totally tanks, and is wiped to zero, we all will have bigger things to worry about in this world.

The last market crash taught me one thing. As I was one who pulled money out, in fear of losing more, only to re invest it after that market had bottomed. Is that the economy will see better days, despite what the current days news headline may state.

Also, at that time, and without as many years of market experience as others, I was fearful. You sound a little fearful too. I have learned it is best not to act out of fear or greed.

All the best.


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## slacker

Independent of current market conditions, for someone who profess to have very low tolerance for risk, 50% of equity exposure is pretty high.

Like I always say, the worst thing is not if your equity fall by 40%. The worst thing is when it falls 40%, you couldn't handle your emotions, and sell at at a 40% loss.

I think you need to decrease your equity exposure to something that you are comfortable with. Try a 70% Fixed Income, 30% Equity mix. If that still makes you feel uncomfortable, adjust accordingly.

In fact, you clearly seem uneasy about the level of risk you're taking with your money. I will 100% recommend that you decrease your equity exposure. Do it before it's too late !!

One thing that no one will be able to tell you is when the market will crash. If any advisor tries to give you the impression that they could help you avoid the crash, take your money away from him and run.


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## dentist101

Thanks for the replies guys. I do realize that these blogs are a bit extreme, but I do like to see all sides. I'm a skeptical person and don't blindly believe the crazies, but I do feel that we are in a "tipping point" in financial history here. Whether or not it gets crazy is yet to be seen, but I do think that some very hard lessons are about to be learned in the next 3-5 years or so. I just don't want to be one of the ones who learns the lessons the hard way. I want to be one of the guys with the discipline and patience to be able to capitalize on the unfortunate greed and mistakes of others (ie. the debt-crazed and over-extended). Thanks for the feedback. I do feel a bit better that i'm reasonably well-balanced with what I have now. 

I'm just at the beginning of my financial learning process, and have a lot to learn. I just don't want to have to learn the hard way...easier said than done, I guess


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## MoreMiles

You will hear people telling you... you are in mid-30s and a professional with high income, you can take risk. Even if you lose 50% in stocks, it's not the end of world. You simply start over and you will be fine again.

I will give you another perspective. With all due respect, people with low income need high return to beat inflation and meet retirement needs. Guess what?! You don't! You can simply dump every discretionary money in GIC and still watch it grow 10-50% per year... not from the investments but from yourself. Or you simply put $100,000 cash per year in a safe, for 30 years when you retire.... you would have $3 million dollars, with no interest or risk. No one else has that kind of ability.

So you see... either way, to join or not to join the stock market, there is no worry for you!

By the way, watch out for Investor Group.. they are VERY aggressive in soliciting dentists and physicians. They love to offer these fancy leveraging investments... telling you to make mortgage interest deductible. Essentially, they would encourage people to purchase mutual funds 3-5x their net worth, with HELOC, business guarantee, margin, back load mutual funds. So when you can an advertising about dinner talk for "Saving money with a professional corporation and tax saving strategies" from them... be careful!


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## gibor365

slacker said:


> One thing that no one will be able to tell you is when the market will crash. .


I can tell! TSX is already crushed.... and crush can continue. 
It's officially in so called "correction" mode, in normal human English it's crush


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## webber22

You couldn't have picked a worse time to enter the market during the past 2 years, since the market has run up so high. 

You don't mention what specific funds you have, are they high fee mutual funds ? If so, then now could be a good time to switch to lower cost alternatives such as etf's.


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## andrewf

gibor said:


> I can tell! TSX is already crushed.... and crush can continue.
> It's officially in so called "correction" mode, in normal human English it's crush


Look at a ten year chart and say that again. You're sounding hysterical.


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## Sampson

I think you have made a mistake. You spend more than half your post describing how you worry, and how you think your tolerance for market volatility is extremely low.

So why invest half your RRSPs and TFSA contributions in something you are not comfortable with.

Also, what has your FA told you? You have a somewhat complex portfolio, but you yourself say you have no experience and little background understanding equity markets, so can you explain why you chose your portfolio allocations?


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## dentist101

@ Sampson - You're absolutley right, I may have made a bit of a mistake. I wanted to enter the markets, and thought that this may be a bit of a good starting point. My FA suggested this 50/50 split as a good starting point (since, in his words, i'm young enough now to tolerate volatility for a longer period of time). He basically told me that, if the markets tank (as they did in the last crash of 3 years ago) I would likely lose close to 20% of my investments (as opposed to 40-50% if I was heavier in equities). I was ok with that at the time. 

I guess, I didn't really know EXACTLY what my tolerance was until I got right into the thick of things...how do you know really? I'm not in panic mode, I just don't want to get caught with my pants don't. Most guys on here (I assume) are guys with fairly high risk tolerance and more experience investing than I have. Fair enough. I'm just being honest in my evaluation of myself. 

I realize that I entered the market at a reasonably high point. I asked a few people about this, and some responses that I got were "there's never a bad time to enter the market"...ok, fair enough.

I can admit when I might be over my head in risk, that's why I wrote the post. As of today, i'm down 2.5% of my original $100k I invested (the rest of my RRSP/TFSA [$90k] is in GICs). Obviously not the worst loss of course, but a good time for me to re-evaluate things. This is what my invested RRSP portfolio looks like:

Fund Units Value 
Aggressive Equity Fund (Natcan) 150.74499 $4,611.92 
Bond Fund (PH&N) 1,210.75979 $15,392.15 
Common Stock Fund (Natcan) 124.17733 $9,047.45 
Corporate Bond Fund Corporate Class(CI) 1,888.45901 $25,113.67 
Dividend Fund (PH&N) 1,159.42808 $14,302.82 
Emerging Markets Fund (Brandes) 225.66324 $4,803.40 
Global Growth Fund (Capital) 703.92424 $9,600.33 
High Income Fund (Fiera Sceptre) 376.47677 $4,872.93 
Money Market Fund (Fiera Sceptre) 880.60745 $10,027.83 
Total $97,772.50

I appreciate the feedback. My FA is a salaried advisor whose services are provided at no charge to me, as i'm a member of the Canadian Dental Association (it is a service that we can choose to use, and is paid for via our membership fees). I'm not saying he's any better than the rest, but he seems reasonably straight and knowledgable.

Basically, the reason that I entered the markets was a poor one. I was made to feel like a chump having only been getting GIC returns over the past 8 years or so. My FA didn't express this, but alot of other people I talked to did. What I basically heard was "sure they are safe, but you can't even beat inflation with them!". I get it, but perhaps that might be ok for me - just accept the fact that I will be the turtle rather than the hare, and live with it. 

I guess I just need to hear from some of you guys who've been at it longer than I have. Is my thinking normal here? Am I being a bit rash? I AM emotionally tied to my money - absolutely! I guess i'm looking for advice for my mindset as well as for my portfolio.


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## Karen

I never thought I'd see the day when I would venture to give anyone investment advice because I am so risk-averse that every penny I own, both registered and unregistered, is in GICs. And I'm really not giving advice; I'm simply commenting that I agree with MoreMiles. If you're losing sleep over your investments, there's no reason why someone in your position can't afford to stick with GICs. Even though you may not reach retirement age with as much money as you might otherwise, you will be able to retire extremely comfortably without taking any risks at all. I'm sure you're aware that the banks are all willing to give a bonus on their normal rates when the amounts involved are large. The last time I renewed a GIC at Scotiabank (last week), they gave me 3.2% for a five-year term when their posted rate was 2.1%.

Again, and I can't stress this enough, I am not giving advice, just letting my thoughts wander.


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## brad

The way I look at equities is that you "lost" your money the moment you exchanged your dollars for shares -- in other words, the moment you bought your stocks or funds. So it doesn't make sense to say you're losing money when the market crashes -- all a crash means is that the value of your shares has fallen, and if you needed to turn those shares back into cash today, they'd be worth less than you paid for them.

But in your case, you don't need to turn those shares back into cash today. You need to start turning those shares back into cash 30 years (and more) from now. 

Thirty years is a long time. The odds are good that, despite many ups and downs, by the time you're ready for retire your portfolio will not only be worth more than you paid for the shares, but will have grown faster than inflation. That's the bet you're making, it may not turn out to be the right bet, but you also have to understand that keeping everything in GICs is a bet too: if inflation rises significantly your GIC investments will also be worth less than you paid for them by the time you need that money.

I agree with others here, though, that if you really are risk-averse, you could probably afford to keep a larger share of your portfolio in GICs or some other low-risk investments. Whether you should sell off your equities is another question; you could keep them (I'm not sure about these particular funds you've chosen; if it were me I would have put everything into index funds), and then just focus on low-risk investments going forward, so that the equity portion of your portfolio becomes progressively smaller (in terms of percentage) going forward.

And by the way, I know it's just a figure of speech, but we're not all "guys" here.


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## Karen

> ...we're not all "guys" here


Thanks for drawing that to his attention, Brad.


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## humble_pie

the way i see it, the net worth is 490,000, not 600,000.

ok maybe somewhat north of 500k with a car.

and out of this 490k, one-half of an rrsp worth 190,000 is invested in funds. That's a mere $95,000.

and this small account has been put into 9 different funds, which is far too many. I was just thinking to myself hmmmmn that looks like some nightmare dreamed up by investors group when i read moremiles' message on the same.

then i read dr.dentist's 2nd post indicating that the advisor is from the canadian dental association. I would say there's hardly a shadow of a doubt but that they are paid - and well-paid - for selling the kind of funds that they do sell.

i for one thought that the fund list was outrageous. Possibly there are back-end load fees, which would be substantial & punitive if dr.dentist were to redeem all immediately.

plus the cda advisor got it backwards imho. Those growth & dividend holdings should not be in the rrsp imho. They should be in non-registered account where their tax-favoured income & capital gains can best be utilized. What should go in the rrsp are the interest payors like GICs & the bond funds.

and why on earth has this advisor put rrsp money into a money market fund that pays zip ? dr.dentist is the last person to need ready access to cash out of rrsp. And - speaking of ready access to cash - does dentist have a tfsa, which is important for a young high-income earner.

the bright lining to the cloud is that dentist has only committed 1/5 of his assets to this equity exposure. He still has the remaining 4/5ths - about 400k - in cash.

karen - our best & most successful GIC spokesperson - has an excellent suggestion. For the ROC (rest of cash) dentist could do a GIC ladder ranging from one year out to 5 years. He may not receive quite the bonus that karen does, but if he shops around he should find an agent or a bank manager who can procure better-than-posted rates for an aggregated 400k.

next, dentist could plan what to do with new savings that he can probably put aside every year from his professional salary.

if i were dr.dentist, i would no longer count on cda advisor no matter how much i liked or trusted this individual, because it appears advisor is only licensed to sell mutual funds. What i would do is split all new savings. I'd add half to 2/3 to existing GICs. With the remaining third, i'd study how to invest at low cost in canadian dividend stocks. Dentist's tax return will benefit from dividend tax credits. In fact the cda advisor should have recommended a non-registered allocation into the dividend fund imho.

dr.dentist could even take the next breathtaking, cliff-leaping, bungee-jumping step. He could prepare himself for the day when he will open a discount brokerage account & buy a real-life dividend-paying stock. Like a bank or a utility stock. It's no more alarming than the day he first seized a dental drill & applied the same to a real live patient quaking in the dental chair.


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## m3s

Haha, awesome post humble

Nothing wrong with keeping everything in cash if it lets you sleep at night..... imo it's actually less risky to have a proper balance of many assets. I wouldn't feel comfortable with 100% cash myself. If the price of something goes through the roof tomorrow and you only have cash then you just lost money imo. If you're diversified, you actually have more money. I couldn't sleep at night with 100% cash

CDAs are experts of getting people to spend the most on fees, and displayed again here


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## Sampson

humble's post is a good one, and you do have a relatively small amount invested in the market, but if even that makes you nervous, try to wade in more slowly. brad also makes an excellent poit about markets outperforming over the long run, 20+ years.

They are competing emotions, not wanting to lose, but wanting to gain, It's clear that you are wanting a bit more growth (hence investing to begin with), so start with a smaller amount. The reality is that what you just experienced is not a significant loss at all. How would you feel if your $100k became $50k?

Check on load fees, and how long you might have to hold these without incurring penalties. IF they aren't high, maybe you should take some of this out of the market, and slowly put more back in as you feel more comfortable.


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## kcowan

I am with Humble and Karen on this one. You have fallen for a sales pitch, and a bad one at that. Your greed has temporarily overtaken your fear for you to take that step. It will likely be expensive to try to unwind it now. So do what you can but don't overreact.

You have high earnings and you have no dependents. Relax and concentrate on building you future savings and LBYM and you should be just fine when it comes time to retire. Consider any results from the $95k portfolio to be a learning process. Put future savings in secure instruments.


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## Jon_Snow

With a salary that most Canadians will never see, and with prospects of it increasing in the future, I think the OP has very little reason to be stressed out. 

Part of the reason I can't yet commit to stocks and the volatility that comes with them is that by living a LBYM lifestyle, my networth increases steadily and predictably every month by simply spending far less than we earn. GIC's fit my investment personality to a tee... especially when I'm yielding 5.25% on the back end of a 3 year GIC like I am this year. 

A severe market correction, however, would make it impossible for me to sit on the sidelines.


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## Belguy

Buy, hold long term, rebalance and prosper.

I believe that a self-directed portfolio of index products, such as those listed at www.canadiancouchpotato.com under model portfolios would have been the preferred way to go. I just do not trust the motives of most financial services salespersons no matter how genuine they may sound.

Setting up an account with a discount brokerage, determining an asset allocation that is right for you, buying four to seven index products, and rebalancing periodically as required is what I would recommend.

After that, and with time and research, you could add some dividend paying stocks of companies that you know will stay in business and which have a history of increasing their dividends with a portion of your portfolio while maintaining your core index holdings.

I have been through many market corrections and the main difference now is that I am retired with a shorter timeline. You are much younger and so I would just not worry so much about it but do realize that investing in the markets is a rollercoaster ride and they never go straight up but they do trend up over time. Age is on your side.


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## dubmac

fatcat said:


> I would suggest that you spend some time reading serious sources of financial information (bloomberg, globeandmail, financial times etc) and make an informed decision on your own.
> 
> Nobody knows. Form your own opinion.


Belguy..luv your posts...good advice. I'm a follower.
My 2 cents follows fatcats. 
Read "The Intelligent Investor" - you'll probably fall asleep alot (it's isn't exciting), and read as much as you can, as often as you can. There are even some authors of books ("Pensionize your nestegg"?) who post on this site.


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## dentist101

Thanks again everyone (guys AND gals)! This has been quite a good learning experience for me. I was actually under the notion that I was getting indexed funds, but I guess I was wrong. I will learn to ask more questions from now on. I have opened up an online brokerage account for my TFSAs (have not traded yet)...I figured starting out with trading $15,000 would be a good place to start. I was planning on using the Canadian Couch Potatoe recommendations for this. I will definitely research before I pull the trigger. 

@ jonsnow - thanks for the advice. It's good to see that someone has become successful with a low-risk mentality. I wrongly thought that I needed to be moderate-high risk to be successful. I am certainly a LBYM guy, so this will work for me.

What I think I will do is rebalance the portfolio that I currently have with my FA so that 60% of it is in something like 25/75 (with 25% in equities and 75% in bonds) - the other 40% will be put into GICs. That will be it for my market exposure for now. I will look into the fees charged for rebalancing or withdrawing, and make my decision from that. I will consider this my riskier investments, and place the majority of my future investments in low-risk GICs, etc. Until I feel more comfortable with risk, I think this might be the best route for me to go.

I appreciate the feedback. Alot of my friends and colleagues blindly trust advisors, and I want to be different from them. Hope i'm on the right track. 

@ humblepie - I see where you'd think that my math is wrong. I didn't mention that the rest of my net worth is in Agricultural Land ($100,000 in equity - no debt) that I also get an income from. Vehicles only makes up about $15,000 of total net worth. So, I am a bit more divesified that way. Your advice seems great tho. thanks

Hopefully one day i'll have my head wrapped around all of this. cheers


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## ChrisR

I just want to make some comments on the cost of the actual mutual funds in your portfolio. You will notice that this forum is full of DIY investors, and as such we can be very critical of the mutual fund industry!

Looking a little closer at the mutual funds themselves, you can see that the respective management expense ratios (MERs) for the funds you've listed are: (from Globeinvestor website)

Aggressive Equity Fund (Natcan) 1.00
Bond Fund (PH&N) 0.65
Common Stock Fund (Natcan) 0.99
Corporate Bond Fund Corporate Class(CI) 1.25
Dividend Fund (PH&N) 1.20
Emerging Markets Fund (Brandes) 1.77
Global Growth Fund (Capital) 1.77
High Income Fund (Fiera Sceptre) 1.45
Money Market Fund (Fiera Sceptre) 0.67

The weighted MER of your portfolio is then: 1.14%. In addition, all of these funds are listed as "no load", meaning that there should be no deferred sales charge for selling the funds. There may still be a an early redemption fee. If there is, it is simply to discourage you from jumping in and out of the funds in an attempt to time the markets. Early redemption fees should only apply for a couple of months.

I expect that your adviser IS getting paid for selling you mutual funds. A small amount of the MER from each fund almost certainly goes to your adviser. On the other hand, your adviser does not seem to be a predatory mutual fund salesman, just interested in selling you the most expensive funds he can! 

In other words, you didn't get "taken for a ride" buying these funds. You ARE paying a premium for an actively managed portfolio and for the services of a professional adviser, but at the same time, your professional organization seems to have set up a reasonable deal allowing you to purchase active advice for somewhat lower cost than you would have if you sought out your own adviser.


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## dentist101

@ chrisR - Thanks for the post. I admit that i was a bit lazy in researching the details of the funds that i am in. i'm just in the process of learning what MERs are and how etfs work, etc. I feel a bit better about what i'm in now. i do realize that there is a trade off - a bit higher MERs for some good management and flexability in the funds. I was told that i could not do any rebalancing for one month. that month is now passed, so i will see how to proceed. 

the more research that i do, the more that i'm starting to feel that i may not want to spend the time on actively investing. my career takes alot of time, and is stressful enough. i do like knowing more about investing tho, as knowledge will hopefully lead me to better future decisions.

it certainly is possible that my FA is getting paid for putting me in these funds, but that was not what i was lead to believe. I would be dissapointed if they were doing things that were not straight-up. i will ask him next time we speak. what i was told is that he is FULLY on salary and does not get paid any more or less by what i choose to invest in. i am a very skeptical person, and that is why i felt a bit more comfortable with him and investing with the canadian dental association advisors.


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## Belguy

From Chris' research, I think that I may owe the advisor a bit of an apology as the fees quoted seem quite reasonable.

To the dentist, just to clarify, what percentage of your total overall new asset allocation are you now targeting for bonds????


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## Cal

There is a learning process to all of this. And you are doing it. Opening TFSA. Understanding yoru risk tolerance. Getting a strategy.

IMO no bad time to buy a great company anyways. 

Enjoy the site.


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## fatcat

dentist101 said:


> @ chrisR - i do realize that there is a trade off - a bit higher MERs for some good management and flexability in the funds.


 the question is whether or not the higher mer and active management gives you better returns than passive funds with low mer's ... over time i don't think this is the case ...


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## kcowan

Barry Ritholtz reports on the unreliability of news sources

Good lessons for any investor...


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## dentist101

@ belguy - i was thinking of taking my original $100k that was put into a 50/50 (stocks/bonds,money market mix), and put it into:

$60k -> GICs (just to reduced my exposure for the moment. i can jump into markets later when i feel more confident)

$40k -> 25/75 (stocks/bonds, money market mix) - i could simply leave this as a 50/50 allocation i suppose...i will have to make that choice. 

is it wrong to to have this 25/75 allocation? am i too overweighted in bonds? any help would be appreciated.


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## Belguy

I really can't sit out here in cyberland and tell anyone whether their chosen asset allocation is appropriate for them or not as I just do not have nearly enough to go on.

What I can tell you is that my own 60% equities to 40% fixed income has achieve an approximate 10 percent annualized return for me spread out over many years. Including in those were some years when I had actually a negative return on paper but I never sold in a panic and just rode the stock market rollercoaster for the full riding experience. Usually, a bad year is followed by a better year as markets inevitably rebound in time. The buyers seem to always return when the prices become enough of a bargain. 

That said, history and past performance may bear no semblance to future results. We live in an uncertain and ever more interconnected world where a coup in Swaziland could cause markets everywhere to crash.

Some people are able to experience all of the market gyrations with the hope of achieving better long term returns and others are more suitable for investing in a much more stable ladder of government bonds.

We are all different. To thine own self be true. You've got to be able to sleep at night and not worry about how your investments are doing.

Hiding under the bed is not very comforting.


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## kcowan

OP I think you need a long term financial plan. That will show you how much you can save each year and the long term effects of compounding those savings. Then you can play with the compound ratio that you need and derive the average return from those savings. 

What you will find is that the amount of savings is the most significant factor in your long term financial plan and will make the focus on incremental returns from your $95k portfolio seem like a waste of time. Other than a learning experience, of course!


----------



## dentist101

kcowan - good advice. i really think you're right. i'm probably blowing things out of proportion in the grand scheme of things. this might be a dumb question, but how exactly is the best way to make a "long term plan"? is this something that i should sit down with a FA about, or can i do this myself? any advice on books/resources to make this long-term financial plan? i really would like to put something together fairly soon. ironically, there was an article on msn a few months ago that said that people's anxiety was less, happiness was greater, and life was beter when you had a financial plan in place. that's where i'd like to be. thanks


----------



## kcowan

Keep it simple initially. Take your earnings and make some assumptions about how it will grow. Take the taxes you pay and do the same. Make an assumption about how much you save after tax and that contributes to your annual savings.

Take your portfolio and project it at 6% per year. Take your expenses and project them at 4% a year.

That will give you a first cut at a basic plan. Now your can test what extra savings will do compared to extra portfolio growth. It will give you a visceral feeling for what matters. Then you can tune it with capital acquisitions like new cars, clothes etc. This will give you a good perspective.

I was in planning for a top 10 Fortune company for 3 years. I think simple is better than what they did.

The reason I say to start simple is that an FA can give you a finished product but you will not learn as much.


----------



## hboy43

Hi:

I think you need to take some time to figure out who you are and where you came from. I am having a hard time squaring the highly educated, high income earner, with the fears his own shadow investor. It isn't on the surface rationally consistant. Perhaps the OP grew up in poverty, and his entire family somehow got him through school, but he just can't get past the deprivation of his youth.

As an example from my life, I realized about age 35 why it was determined at age 5 why I would never have a natural child. Also why I always got the willies holding any baby younger than about 6 months, still do in fact. You see, one day I rounded the corner of the bedroom door of my 4 month old brother, only to discover him dead of SIDS. Likely the seminal event of my entire life. On some subconcious level I have been driven to make sure I was never again the one that found the dead baby.

So much of who we are goes back to our youth and what went well or wrong then.

hboy43


----------



## Sampson

dentist101 said:


> how exactly is the best way to make a "long term plan"?


What I would do is first identify your goals, then determine based on a budget and on potential returns on your equity, the best way to achieve those goals.

Do you want: to own a house?, get married?, have children?, support children's education?, own a practice?, go to South America for 6 months? go on wild vacations every year? own a fancy car? retire at 45? etc etc.

If you highlight these types of key life events, and plot them on some sort of time line, then you can have a parallel line with your financials, savings, income etc, and see if all those things are attainable. As you mention, it is very empowering to see these things written out, and KNOW that you have a plan to get there.


----------



## kcowan

Sampson said:


> ... As you mention, it is very empowering to see these things written out, and KNOW that you have a plan to get there.


We had to do a plan in 2002 when we had the opportunity to retire on our 2000 melt down portfolio. It looked like it would work but required some serious changes. The plan gave us the size of those changes.

We had an emotional desire to buy a snowbird residence but the plan said no. By 2007, the plan said yes so we did.


----------



## cannew

I didn’t read this entire thread, so I’ll apologize for any over-sight. I hate mutual funds!! When we had an advisor he invested most of our money into them. Over a period of years we ended up basically where we started and he happily collected the annual fees. We also paid dearly in trading fees and taxes. 

To get out of the funds we paid another fee, but it was the best move we ever made.

Since that time we’ve taken charge of our own investments, basically following the Dividend Growth strategy. We only buy when there is a market correction and the stock meets our defined guidelines. 

For us this approach has met our goals and our income has increased each year. We are in our 60’s and are gradually increasing our core investments which generate higher income each year.

There are many ways to invest and it’s finding the method that works for you and your goals. I wish I had spent more time learning about investing when I first started, jumping in and out of the market. But that’s life.


----------



## Sampson

@ kcowan, where did you buy if you don't mind?


----------



## gibor365

As ususal Mr. bernake spoke and US markets dipped in last half and hour....
IMO Feds will just rename QE3 to some other name, but will continue to pump money in some way, Obama cannot afford let market down on 3rd year of Presidential cycle.
TSX, as mix commodity-finanacial sector of NYSE also went into negative territory despite higher prices for oil and gold.


----------



## ddkay

He didn't sound very sure about our trajectory from here. What Greece gave Bernanke took away. It's funny because this always happens.


----------



## gibor365

ddkay said:


> He didn't sound very sure about our trajectory from here. What Greece gave Bernanke took away. It's funny because this always happens.


but he aways repets that he's optimism about the second half of the year


----------



## KaeJS

Yeah. Bernanke killed my mood.

I was flying high earlier today, about a $350 gain. Guy opens his mouth and I end the day with a $40 gain.

... like, really?


----------



## donald

I cant wait to get rid of ben, obama,this obama and this administration is terrible,im off topic but not really,seems to me the obama "expierment"is an utter failure,I hope mitt romney gets in,and the us can start turning this around,i think this is lack of leadership with the feds,everytime you hear ben or obama they keep saying this and that,i know the american economy is beyond complex but this obama admin makes me nervous.It starts at the top and obama is over his head.

The feds have no idea how to turn this mess around,and im getting tired of hearing about the 08 meltdown,thats over 36mths ago...how many times can we listen to "its getting better"results ben,results obama,get moving,like they say,lead,follow,or get the hell out of the way.I cant for the life of me see the american people voting him back in.(maybe im just pissed ben had to open his mouth,and i need a rant,and my gains fell)lol


----------



## Belguy

Obama would definitely be a one term president--IF the Republicans had a decent candidate to run against him. However the Republicans are far too divided to mount a meaningful challenge and so the U.S. might very well face another four years of Obama at the helm which is a very scary thought.


----------



## Jon_Snow

I'll take Obama over anyone the Republican's can offer up....


----------



## gibor365

Belguy said:


> Obama would definitely be a one term president--IF the Republicans had a decent candidate to run against him. However the Republicans are far too divided to mount a meaningful challenge and so the U.S. might very well face another four years of Obama at the helm which is a very scary thought.


personaly, I don't give a fu&^ who is US president, I just want markets to go up


----------



## Financial Cents

Agreed Jon. Unfortunately, he's going out. Maybe Ron Paul will get in? 

http://www.ronpaul.com/

If I was an American, I'd vote for him.


----------



## gibor365

KaeJS said:


> Yeah. Bernanke killed my mood.


I hate this guy with funny last name.... On his official announcement market didn't react, than he said more crap to journalists..... looks like he played short and needed to put market down 

Looks like tomorrow will be a very gloomy session...looking at futures commodities and indexes I expect market to go down 160-180 points.... (I'd like to be mistaken at positive side)


----------



## Financial Cents

gibor said:


> I hate this guy with funny last name.... On his official announcement market didn't react, than he said more crap to journalists..... looks like he played short and needed to put market down
> 
> Looks like tomorrow will be a very gloomy session...looking at futures commodities and indexes I expect market to go down 160-180 points.... (I'd like to be mistaken at positive side)



Gibor, you're not worried are you? I recall you have lots of sound holdings?


----------



## Belguy

Economic fears are rising with potential "significant consequences" ahead. Here are some links to interesting bedtime stories:

http://www.theglobeandmail.com/repo...y-rising-bank-of-canada-warns/article2070766/



Even God could not solve the European debt crisis and so mortal men don't stand a chance!!! Stay tuned.

http://www.theglobeandmail.com/repo.../marks-are-in-for-us-feds-qe2/article2071527/


----------



## gibor365

Financial Cents said:


> Gibor, you're not worried are you? I recall you have lots of sound holdings?


I have a mixed of different holdings good ones and crappy ones (depends on market and economical situation)... but if indexes going down , all my portfolio on average is going down...so far YTD I'm about 3-3.5% down


----------



## KaeJS

gibor said:


> Looks like tomorrow will be a very gloomy session...looking at futures commodities and indexes I expect market to go down 160-180 points.... (I'd like to be mistaken at positive side)


Market will be down tomorrow for sure. I don't really mind. I just hope Gold continues to rise. Barrick Gold is my only main concern right now.

The futures don't mean shyt. The futures turn on a dime. They never tell you anything. The only time futures mean anything is when its 9:20am lol.


----------



## KaeJS

Belguy, That is old news.

The market reacted to that at 9:54am this morning. Its been mainly accounted for in the reflection of todays bank stock prices which are down significantly.

In which case... I'm glad my BMO share purchase plan will be grabbing another $900 worth of shares next Thursday.


----------



## gibor365

KaeJS said:


> Market will be down tomorrow for sure. I don't really mind. I just hope Gold continues to rise. Barrick Gold is my only main concern right now.


WHy you don't mind?! DId you sell everything except ABX?!


----------



## KaeJS

gibor said:


> WHy you don't mind?! DId you sell everything except ABX?!


No, but everything else I own pays a healthy dividend, and if ABX would just hurry up and get to $47, I can sell out, reduce my margin to 0 and buy some undervalued stocks.

I want to accumulate as much TD Bank as I can. Eventually they will do a stock split (probably not till 2013 at the rate things are going now) but it would be nice to have 500 shares and get a 2 for 1 split.


----------



## Financial Cents

$900 worth of shares in your SPP? Wow, nice, I wish 

I only get a couple share each quarter with my DRIP. Well done, very well done KaeJS!!!

Gibor, does that mean you're buying something tomorrow? When there's blood in the streets...


----------



## gibor365

Financial Cents said:


> $900 worth of shares in your SPP? Wow, nice, I wish
> 
> I only get a couple share each quarter with my DRIP. Well done, very well done KaeJS!!!
> 
> Gibor, does that mean you're buying something tomorrow? When there's blood in the streets...


I don't know yet.... I suspect there will be a "blood" not only tomorrow.... To tell you the truth I hold stocks/ETF only in registered accounts and TFSA and I won't need those most likely for another 10-15 years, but I'm not sure if not better for me would be instead invest into 5 years laddered GIC.
Regards dividend stock s I was considering add some PM or MO .. they got hit lately and I believe in tobacco lol


----------



## KaeJS

gibor said:


> I'm not sure if not better for me would be instead invest into 5 years laddered GIC.


Negative.

Look at the dividend payout of Canadian Banks right now. Why would you choose a GIC over that?

Edit: and choose PM. I don't necessarily believe in tobacco for the long term, but for the short term it could be really good.


----------



## ddkay

If Mark Carney is concerned about Canadian banks, that makes me concerned too... According to the BoCs June 15 Housing Report, over 40% of Canadian bank assets are residential mortgages. According to today's Financial System Review Canadian banks have 3% direct exposure and 18% indirect exposure to the euro-area perhipery not including off balance sheet derivatives, guarantees and credit commitments.

From today's Senate meeting Mark said, "Under our current forecast, we don't anticipate Canada's overnight rate to reach a more normal level of three per cent until 2013." So your safest bet is probably a 2 year GIC.


----------



## Jungle

Us unemployment claims have increased. Get ready for a red opening.


----------



## KaeJS

Down $400 by 9:31am


----------



## HaroldCrump

donald said:


> I cant wait to get rid of ben, obama,this obama and this administration is terrible,im off topic but not really,seems to me the obama "expierment"is an utter failure


The ironical thing is that Obama hasn're really _done_ anything in these 3 years.
He's talked, mostly, about hope and "can do" but when all's said and done, he hasn't done anything to change status quo.

For all his pedantic and evangelist like talking, he's pretty much stayed the course set by the Bush administration.
Both in terms of foreign policy, economy and domestic policy.
Except for the churn made during the health care bill during his first year.

All in all, it's been a rather insipid and uninspiring 3 years.


----------



## kcowan

In PV Mex. Old town, southside, up on a hill overlooking the Bay.


----------



## gibor365

What happened to market today? Why was big rebound from lows at the end of they? NASDAQ even managed to close in positive territory....
Technical are pretty neutral. VIX is still below 20. TICK on Dow had a weak swing down to -200 and started to go up, TICK Nasdaq even better , swing down just -100 and swing up +400. Looks like institutions are in buying mode?


----------



## leoc2

gibor said:


> What happened to market today? Why was big rebound from lows at the end of they? NASDAQ even managed to close in positive territory....
> Technical are pretty neutral. VIX is still below 20. TICK on Dow had a weak swing down to -200 and started to go up, TICK Nasdaq even better , swing down just -100 and swing up +400. Looks like institutions are in buying mode?


Greece will implement cutbacks.


----------



## ddkay

False flags, if the market was still open I would bet on a crash tomorrow. 

Some big tech "earnings" after the close: $MU -12.81%, $ORCL -4%.


----------



## KaeJS

Everyone ready to get rocked again tomorrow?

North American Futures = Down
BIS says Interest Rates must rise
Greek Protests


----------



## Abha

KaeJS said:


> Everyone ready to get rocked again tomorrow?
> 
> North American Futures = Down
> BIS says Interest Rates must rise
> Greek Protests


Do you have a stop limit on Barrick? I know that position has been hurting you in the last little while.


----------



## Jon_Snow

I'm one of those wackos actually rooting for a correction, so I hope you are right.


----------



## humble_pie

futures & europe up this am but reuters weekend analyst roundup sees some predicting futher tsx weakening to potential low of 11,500 for a total downward correction of -20% from march highs.

http://ca.reuters.com/article/businessNews/idCATRE75P0Z020110626?sp=true

speaking of reuters charts for its stock are looking bullish imho w stochs, rsi & macd pointing the way back up.

TRI is one of those truly multinational companies anchored in every part of the world. CEO tom glocer recently commenting on acquisition of large muslim data base on shariah banking & finance, for example.

yet because of its origins & continuing if tenuous umbilical cord to toronto, TRI's dividends are 100% eligible canadian divs, taxwise.

hint: TRI owners should hold stock in US account because its divs are paid in USD. Investors who hold in canadian account are allowing their brokers to collect fierce FX fees on each & every dividend.

interlisted canadian stocks paying USD divs - there are quite a few of these companies - are 100% eligible for canadian dividend tax credits & will not be subject to US withholding as are divs on US stock.


----------



## OptsyEagle

Is it just me or is there a crapload of negativity in the stock market these days. Everywhere I turn someone is predicting an economic collapse, a TSX lower over the summer, commodity prices to continue falling, a new QE3 required, whatever.

Investor Intelligence bullish forecast is below 40%, Investment Management sentiment is below 30% (NAAIM) and equity Put/Call ratios are hitting higher and higher levels (21 sma).

I am beginning to think that the stock market might actually go up.


----------



## KaeJS

Abha said:


> Do you have a stop limit on Barrick? I know that position has been hurting you in the last little while.


No stop limit on Barrick.

But its really annoying me. The technicals looked extremely promising when I bought. I thought for sur it would swing from $46-48, especially since it was over $50 multiple times.

I would like to just sell out at $46. I don't even want my $48 price target anymore. Forget it.


----------



## KaeJS

OptsyEagle said:


> Is it just me or is there a crapload of negativity in the stock market these days..


There's a crapload of negativity.

I'm usually 100% bullish, but right now - I've been the most bearish I've ever been in my entire life.


----------



## webber22

Come on the tsx is down only 10%. In March 2009 most stocks were down 50% or more  Most likely a once in a lifetime event.


----------



## MoreMiles

webber22 said:


> Come on the tsx is down only 10%. In March 2009 most stocks were down 50% or more  Most likely a once in a lifetime event.


Nope, not once in a lifetime... once only every 8 years. Be prepared to lose 50% of your portfolio every 8 years. It happened in 2000, then again 2008... so next one is scheduled for 2016. In other words, there is a market crash with every second Olympics. They should stop doing those Olympics. 

http://www.google.com/finance?q=TSE:OSPTX

If you are unlucky enough to lose 50% in 2000 then need to retire in 2008... just when you came out of a major crash, you bumped into 2008, ouch. That's why I still believe market timing do make a difference.


----------



## Homerhomer

MoreMiles said:


> Nope, not once in a lifetime... once only every 8 years. Be prepared to lose 50% of your portfolio every 8 years. It happened in 2000, then again 2008... so next one is scheduled for 2016. In other words, there is a market crash with every second Olympics. They should stop doing those Olympics.
> 
> Not accurate at all, since 1950 such drastic corrections happened only 3 times, 1974, 2000 and 2008, that's on average every 20 years, however I wouldn't be surprised if they happen more often in the future the way things are going.


----------



## Sampson

Homerhomer said:


> MoreMiles said:
> 
> 
> 
> Not accurate at all, since 1950 such drastic corrections happened only 3 times, 1974, 2000 and 2008,
> 
> 
> 
> You missed one, 1987
> 
> But I agree with you, seems people think these things are supposed to happen all the time now. Maybe they will, now that the equity premium may be reduced going forward as the US consumer becomes less of a factor in the World economy.
> 
> Goldman Sachs might be trying to make 'something' happen every 8 years so they can cash in
Click to expand...


----------



## Homerhomer

Sampson said:


> Homerhomer said:
> 
> 
> 
> You missed one, 1987
> 
> :
> 
> 
> 
> That was only 35% drop  well short of our desired 50% mark
Click to expand...


----------



## HaroldCrump

Homerhomer said:


> That was only 35% drop  well short of our desired 50% mark


It's not these flash crashes that worry me.
It's the long sustained periods of zero growth, sideways markets that worry me.
Like the Japanese market for the last, umm, 20 years.
We haven't had that bad over here, although the late 1980s and early 1990 came close to such stagflation.
That was before I'd started investing (or even had any money).
The question is whether we are now heading into such a period, with a healthy dose of global political uncertainity.


----------



## kcowan

Well you need to summarize the positives on one side of the sheet and the negatives on the other side. Then weigh things in the balance and decide what to do. I decided to sit on the sidelines until the storm clouds clear. I still hold about 20 stocks but I have a lot of cash.


----------



## Homerhomer

HaroldCrump said:


> It's not these flash crashes that worry me.
> It's the long sustained periods of zero growth, sideways markets that worry me.
> Like the Japanese market for the last, umm, 20 years.
> We haven't had that bad over here, although the late 1980s and early 1990 came close to such stagflation.
> That was before I'd started investing (or even had any money).
> The question is whether we are now heading into such a period, with a healthy dose of global political uncertainity.


Harold, one can argue that we are already there, S&P 500 is virtually flat for the last decade, and many blue chips are pretty much flat for that period as well. Thankfully TSE has outperformed by a large margin so as Canadians we have few more options to invest in.

Makes stock picking and being able to identify when to buy them even that much more important, wish it were as easy as it sounds


----------



## Belguy

I just finished my balance sheet and have nothing on the positive side and two full pages on the negative side.


----------



## andrewf

The balance sheet is assets = liabilities + equity. What's the negative side?


----------



## Sampson

andrewf said:


> The balance sheet is assets = liabilities + equity. What's the negative side?


The US housing market


----------



## Cal

HaroldCrump said:


> It's not these flash crashes that worry me.
> It's the long sustained periods of zero growth, sideways markets that worry me.
> Like the Japanese market for the last, umm, 20 years.
> We haven't had that bad over here, although the late 1980s and early 1990 came close to such stagflation.
> That was before I'd started investing (or even had any money).
> The question is whether we are now heading into such a period, with a healthy dose of global political uncertainity.


I worry that the US economy, or the global for that measure, as they try to eradicate gov't debts in general will fall into a similar Japanese style melt over the next 5-10 years. IMO the sooner it is delt with the sooner we will have a true recovery.


----------



## Belguy

While some are talking about a potential "true recovery", others are contemplating an imminent crash.

Which will it be?


----------



## Homerhomer

Belguy said:


> While some are talking about a potential "true recovery", others are contemplating an imminent crash.
> 
> Which will it be?


Either, neither or perhaps even both ;-)


----------



## Betzy

This Friday is QE2 end Day, or is it going to be QE3 start day? Doom and gloom or doom and gloom...


----------



## Abha

All of the above.

This is definitely a traders market.

Longer term this looks like a good position to begin some core holdings. 

Don't do it all in one shot though. Build 15-20% positions at a time to play it safe.


----------



## Belguy

One thing that I don't like about investing in equities is that my retirement portfolio could potentially be ravaged by decisions made in the Greek Parliament--or by the governments of Portugal, Ireland, Spain etc. or by any number of other negative news from anywhere else in this unstable world of ours.

When are the headwinds not blowing?

If, as some are saying, God him or herself will be unable to solve the European Debt Crisis, then how safe are our life savings in the markets currently?


----------



## Financial Cents

HaroldCrump said:


> It's not these flash crashes that worry me.
> It's the long sustained periods of zero growth, sideways markets that worry me.
> Like the Japanese market for the last, umm, 20 years.
> We haven't had that bad over here, although the late 1980s and early 1990 came close to such stagflation.
> That was before I'd started investing (or even had any money).
> The question is whether we are now heading into such a period, with a healthy dose of global political uncertainity.


So if potentially we're headed that way, what is an investor to do? Dividend-payers? Bonds? A mix of both? A mix of gov't debt, GICs and other fixed-income only products?


----------



## kcowan

Belguy said:


> ... how safe are our life savings in the markets currently?


Just answer the question: Will corporate earnings be higher in the future and, if so, by how much? Car builders, home builders, manufacturers...


----------



## andrewf

Belguy said:


> If, as some are saying, God him or herself will be unable to solve the European Debt Crisis, then how safe are our life savings in the markets currently?


You've said this a number of times. I find it amusing, because God can't even make me a sandwich, so I'm not sure what this is supposed to mean.


----------



## davext

Equities are supposed to outperform in 10 to 20 year periods but when I like at the long term, all I see is the can that we kicked down the road. 

Countries and people borrow too much, there is too much credit to go around. This is not the way that society should operate because we cannot be responsible. Maybe a whole bunch of defaults would be a good idea. If everyone defaulted, surely there would still be willing lenders to start from anew since everyone is in the same boat. Then we can enforce much stricter borrowing rules.

As an investor, I'm staying in dividend paying stocks, stable REITs, high interest savings accounts, and short term bonds.


----------



## Argonaut

davext said:


> As an investor, I'm staying in dividend paying stocks, stable REITs, high interest savings accounts, and short term bonds.


Agree with everything there, except replace short term bonds with gold.


----------



## Financial Cents

@davext,

Sounds very reasonable and rather smart. Consistent dividend income from dividend-payers and some short-term bonds can be your security blanket when equities take a dive.


----------



## OptsyEagle

OptsyEagle said:


> Is it just me or is there a crapload of negativity in the stock market these days. Everywhere I turn someone is predicting an economic collapse, a TSX lower over the summer, commodity prices to continue falling, a new QE3 required, whatever.
> 
> Investor Intelligence bullish forecast is below 40%, Investment Management sentiment is below 30% (NAAIM) and equity Put/Call ratios are hitting higher and higher levels (21 sma).
> 
> I am beginning to think that the stock market might actually go up.



So far so good. I wonder how long it will last. Still haven't heard the optimism that should stop the accent.


----------



## ddkay

Crazy speculative theory: failing European banks are liquidating US treasuries and equities as required by the ECB


----------



## KaeJS

Looks like its time for the markets to start heading back down.

.... Yippee


----------



## Belguy

This sentence from today's Toronto Star is what bugs me: "Meanwhile, the European government debt crisis continued to cast a shadow over the markets". How long is this going to drag on and why can't they do something to fix it for once and for all or is this being overly simplistic?

Our retirement savings are being affected by some problem that they seem to be unable or unwilling to solve!

Why should the Greek's socialist way of life lead to a diminished quality of retirement for us?

I find it totally frustrating just like I found the dot.com crisis and the credit crisis maddening in the past.

The major problems seem neverending. Where are all of the smart leaders in the world?


----------



## kcowan

The one things that investors discovered during the 2008 meltdown was that the markets are all interconnected now more than every before. It surprised many investors that diversification in their portfolios did not reduce the decline. Bonds and stocks went down together. Europe, the far east and NA all declined together.

Even money market funds had to be bolstered with cash to prevent their decline.


----------



## fatcat

> The major problems seem neverending. Where are all of the smart leaders in the world?


whoever is in charge is dealing with an intractable problem ... there is just too much debt ... it's all window dressing .. but the inside of the house in in shambles

i am beginning to think that the best and only remedy (and i hear more people talking about it) is to let it all fall and rebuild the system

try this article for fun: http://www.marketwatch.com/story/the-next-worse-financial-crisis-2011-07-06


----------



## andrewf

Rather than bail out Greece, Ireland, Portugal, they should use that money to pick up the pieces of the financial system after they default. Greece should probably just leave the Euro, at least until they can sort out their structural problems. For the next 5 or ten years, their governments will have to get by on whatever tax revenue they can raise.

So, once the Euro banks write down this bad debt, wipe out the shareholders, make the bondholders take a haircut and recapitalize the banks under state control, while guaranteeing deposits. It'll be a mess, but I think we're headed there anyway. I don't see why German taxpayers should have to pay for the profligacy of the PIG countries, and the foolishness of those who lent money to them.


----------



## KaeJS

I have seriously been thinking about just cashing out everything I own.

I am down 4% this year, and its not looking so good. Rather cash out at -4% than cash out at -20%.


----------



## Abha

KaeJS said:


> I have seriously been thinking about just cashing out everything I own.
> 
> I am down 4% this year, and its not looking so good. Rather cash out at -4% than cash out at -20%.


Send me a PM. I'd love to talk to you about your trading style. I think we have a similar style and its been working great for me.

At the very least maybe we can bounce some ideas around.


----------



## Belguy

Given everything that is going on in the world, what percentage of a portfolio should be in equities for a retired person who is approaching 70 and who is depending on his portfolio for the quality of his retirement going forward? My only other sources of income are government pensions.

My latest thinking is that my 60 percent equity allocation is too risky. What percentage would you suggest given the current world debt crisis which many are saying is unsolvable?

I realize that it is difficult when you don't have the whole picture but I would be interested in your general thoughts.

While I have been reasonably comfortable up until now, I find myself getting increasingly concerned. Perhaps I watch the news too much!!!


----------



## Argonaut

At the end of the day you have to ask yourself.. what does Greek debt have to do with the earnings of CN Rail? There are two rules Canadian investors should live by:

1. Don't panic.
2. Don't buy RIM.


----------



## Abha

Belguy said:


> Given everything that is going on in the world, what percentage of a portfolio should be in equities for a retired person who is approaching 70 and who is depending on his portfolio for the quality of his retirement going forward? My only other sources of income are government pensions.
> 
> My latest thinking is that my 60 percent equity allocation is too risky. What percentage would you suggest given the current world debt crisis which many are saying is unsolvable?
> 
> I realize that it is difficult when you don't have the whole picture but I would be interested in your general thoughts.
> 
> While I have been reasonably comfortable up until now, I find myself getting increasingly concerned. Perhaps I watch the news too much!!!


Just go 70% / 30% in favour of capital preservation. Using the 70% allocation, buy some bond etfs, GICS and very stable large cap dividend stocks.

Using the 30% stick to Equity ETF's and use 10% for speculative plays.

I would argue that with a government pension coming in you could even use a 60 / 40 asset allocation model.


----------



## KaeJS

Argonaut said:


> At the end of the day you have to ask yourself.. what does Greek debt have to do with the earnings of CN Rail?.


Nothing. But that's only CNR...


----------



## ddkay

Speaking of CNR... are there any plans for building railway and ports north of the 60th parallel? Investment for the next centuries?


----------



## andrewf

Well, CN depends on freight volumes. If the euro debt crisis leads to contagion and a slowdown in global economic growth, that could have an impact on CNR.

It's all just guessing though.


----------



## ddkay

Recent data suggest a little improvement? My long positions are still on the sidelines, until the US creates the spending room it needs.


----------



## doitnow!

All this pessimism is getting to me. 

Only since I started DYI have I been keeping abreast of world economic news and the potential impact it can have on our savings. Much of what I hear is unsettling to say the least.

Since I am a newbie to investing I would like the opinion of experienced investors. Given the current uncertainty would it be safer and thus more lucrative to have a portfolio based on 40% bonds and 60% in a few blue chip established, conservative, dividend paying stocks rather than exposing large amounts to each of 3 or 4 etf's? 

I am currently invested 40 bonds, 60 in broad based etf's.


----------



## andrewf

> Only since I started DYI have I been keeping abreast of world economic news and the potential impact it can have on our savings. Much of what I hear is unsettling to say the least.


Ignorance is bliss. At least in the short run.


----------



## Betzy

I have no bonds at the moment, trying to keep mostly in good aristocrats with good yield on their dividends. A general rule if you want one is that based on your age this is the amount of fixed income you should have. The rest In my HO should be in aristocrats.


----------



## Jon_Snow

Kash is King.

Of course I'm saying that because most of my investable funds are in cash right now. I have no feel for what may be around the corner, and I'm skeptical that the CNBC talking heads know either.

If only interest rates were higher so my money would actually grow a bit.


----------



## doitnow!

Jon_Snow said:


> Kash is King.
> 
> Of course I'm saying that because most of my investable funds are in cash right now. I have no feel for what may be around the corner, and I'm skeptical that the CNBC talking heads know either.
> 
> If only interest rates were higher so my money would actually grow a bit.


Have you cashed in all your investments due to your concerns about what the future will bring?

How will you know the time is right to get back in? I only ask because I am new at this and have no idea. I am also getting a little spooked by the responses in this thread. Enough to make me want to consider what I can do to protect my investments if **** hits the fan. I am currently 40/60, with the 60 divided in 4 broad based etf's.

Your thoughts...


----------



## Belguy

If you have a long timeline and don't need the money for the next five to seven years, then don't worry about what the market might do in the short term.

If you have a short timeline and will need the money sooner, then maybe you have a right to worry!!!


----------



## MoreMiles

Has anyone thought of hedge funds?

They are supposed to "hedge" for a downside. I am sure where to get them in Canada though.


----------



## KaeJS

Dammit.

I knew I should have sold everything when I said I was going to.



Fk.

Coulda saved myself $600.


----------



## Argonaut

Kae, what's going on man. Maybe instead of cashing out you should think about rebuilding your portfolio. What do you have that you can lose that much in a day? I would split your money evenly among your 5-10 very favourite stocks and just hold 'em. This is what I have done, and my portfolio outperforms the market on a weekly, monthly, quarterly, and yearly basis.


----------



## ddkay

BLS non-farm payroll statistics for May revised down by the most amount in history. Birth/death rate revised up. 

http://www.bls.gov/news.release/pdf/empsit.pdf

Thought something silly like that would happen. Can't trust these initial numbers, buy the rumour sell the news?

The news stream is being interpreted negative again. Labour participation (supply side) drops to 25 year low: 64.1% The Fed has to sell $200 billion in notes within 2 months after the debt ceiling is raised. Italy is imploding.


----------



## ddkay

I can see how easy it is for everyone to flip flop from bullish to bearish when data keeps getting revised like this.


----------



## ddkay

@MoreMiles Hedge funds don't always hedge for a downside lol. Sometimes they're only hedge by name. A hedged fund will be long/short as opposed to long only. They're just closed funds with eligibility requirements ($1mm in assets or $200k income per year). There's probably a few dozen hedge funds in Canada, but relatively fewer than the US because overall there's less access to capital.

There's a Canadian magazine that monitors global hedge fund news. Here's a recent article, AIMA Says Hedge Funds Are 'Safe To Fail'

Petite potatoes: Canada’s hedge fund industry (G&M)


> The whole Canadian industry, encompassing about 150 managers, manages somewhere around $35-billion (Canadian). The result is that most funds are small shops running around $50-million or $100-million, less than many retail stockbrokers


There's also been some high profile frauds like Portus and Norshield that stunted appetite for hedge funds in Canada:
http://www.investorvoice.ca/Scandals/Portus/Portus_Index.htm
http://www.investorvoice.ca/Scandals/Norshield/Norshield_Index.htm


----------



## fatcat

> Has anyone thought of hedge funds?
> 
> They are supposed to "hedge" for a downside. I am sure where to get them in Canada though.


 there are "black swan" or disaster funds out there ... if you are a multi-millionaire, it's probably worth putting 2-3% in one


----------



## ddkay

Ben Bernanke is speaking next Wednesday @ 10AM. Trade accordingly.


----------



## zylon

dentist101 said:


> ... What do you guys think? i'm nervous...a bit scared. This is brand new to me, and not sure what to do. I listen to people talk about the US/Europe and I seriously think that something is coming. What, I don't know. I don't want to know your opinions on what will happen, I just want to know how to PLAY IT SAFE!!!


Apparently, nothing is safe.

The article linked below has nothing to do with Canada (yet), but based on the pharting butterfly effect, it's best to keep one's nose in the air, sniffing for whiff of trouble.

... snips:


> Financial regulators should be alert to the potential for destabilising asset bubbles posed by new financial products that are growing in demand as investors seek higher returns in a low interest rate environment, said Paul Fisher, one of the bank's senior watchdogs.
> (...)
> Exchange traded funds (ETFs) have become a particular focus of anxiety for regulators, who believe they could pose greater risks than are properly understood by many investors.
> (...)
> ETFs, which track specially created market indexes, are being used as investors try to bolster returns. The market has grown quickly and is estimated to be worth $300bn (£190bn).
> Bank watchdog Paul Fisher warns of risk from ETFs


----------



## humble_pie

i'm not scared. Advienne que pourra. Wish this cowardly thread title could be changed.

however, the issue of soundness of many new etf products is looming. There have been a few posts in cmf forum. CC posted. Had a link to steadyhand.

the problem as i see it is more dangerous when the funds are dealing in futures only. Counterparties are not backed. If a counterparty fails then an asset is toast.

funds holding or selling option positions are fully backed by the option exchanges, on the other hand. There is a problem with most of the new etf option funds, however, in that they are mandated to deal in futures & other derivatives as well as options.

there is a fairly new horizon top tsx 60 etf with minimal MER. Cheapest of the cheap cost-wise. There was gross fanfare when it debuted. It holds nothing but futures through the national bank.

many people were thrilled when it appeared. I for one would never own it. Why ? because i don't understand exactly what national bank has done with those futures contracts. To what level of debt at the home bank do they belong. Or have they been swapped forward to some other bank offshore. Who knows, for a certainty, who a real counterparty might turn out to be.


----------



## Homerhomer

KaeJS said:


> Dammit.
> 
> I knew I should have sold everything when I said I was going to.
> 
> 
> 
> Fk.
> 
> Coulda saved myself $600.


Perfect opportunity to examine why what you are doing so far is not working and why is it making you nervous.

You are young, you should be happy when markets gets cheaper so you can buy stuff cheaper and make more money by the time you retire, it's obvious.

Few % drop should not make you nervous, if it does it is an indication your portfolio is flawed.


----------



## ddkay

@KaeJS There's always opportunity to ask questions and learn from your mistakes. At least you aren't this guy: http://en.wikipedia.org/wiki/Nick_Leeson


----------



## Belguy

It's summertime and there are plenty of summer sales out there. Why should stocks be any different?


----------



## ddkay

YEAHHHHH!!!!


----------



## CanadianCapitalist

zylon said:


> Apparently, nothing is safe.
> 
> The article linked below has nothing to do with Canada (yet), but based on the pharting butterfly effect, it's best to keep one's nose in the air, sniffing for whiff of trouble.
> 
> ... snips:


If you own broad-based plain vanilla ETFs such as XIU or VTI that actually hold stocks you are pretty safe. These products did just fine even during the credit crisis. There is a risk that the price of these ETFs could deviate substantially from their NAV as we saw during the flash crash of May 2010. 

The risks outlined in this article are with European ETFs that employ swaps where the ETF vendor and the counter party are often different divisions of the same bank and investor capital is at risk should the bank fail. Regulators, of course, aren't concerned with the little guy's capital! They worry about contagion risk where all these derivatives are chained with each other.


----------



## Causalien

To the thread op:

You have your own company and you say you are risk averse?

According to your nick name and your income (+possibly your private practice as the corp?), you are most likely a dentist. There is an old saying on the street. When there's no more investors to fleece, sell to the dentists. The fact that you are dipping your toes into the market is an indicator.

To answer your question. No I am not scared, there are ways of investing where your downsides are limited. You can both sleep soundly at night and participate in the volatility. I've lost money and lost ALOT before, but I gain it back, so the prospect of losing money does not have as much of an emotional impact anymore. It's just a number. Do you feel like jumping off a building after losing points in a video game? No. That's how I look at it and that's what this is.


----------



## dentist101

@causalien - yup, i am a dentist, and i have 2 corps. one is for my agricultural investments (an ag corp that i operate my small farm out of), and the other is how i operate as a dentist (dental prof corp). 

i will readily admit that my stress and lack of risk tolerance is totally associated with my emotional attachment to my finances...no doubt about it. i am in the process of educating myself so that i can operate and think in a more mature/educated manner, so i can take advantages of opportunities that come my way in the future. i was raised by hard-working, skeptical, socialist-minded savers who were good people, but unfortunately missed out on opportunities because they were afraid of risk and didn't trust themselves (or learn about how to manage/invest wisely). 

for the record, this post has been INCREDIBLY helpful for me! i basically wrote it because i knew i was fearful, but wasn't sure if i was justified in it. also, i wanted a variety of viewpoints on how others (smart, forward thinking people like you guys on this site) think, act, and have views on finances. 

in a nutshell, i have been practicing dentistry for 10 years, and for the first 8 years of that, i didn't real think about finances at all. i saved a bit, didn't go into debt, and lived a frugal life. i coasted, and didn't really work terribly hard, but did what i needed to. i watched as house prices shot thru the roof, how 2008-09 stock market took a beating (and then rallied again), and now realize that it might be a very different world out there than what i was originally raised in. i have taken responsibility for my finances myself, watch my net worth, spending habits, and am trying to learn how to make my $$$ work for me so i don't have to drill teeth and be spit on for more than the next 20 years or so. 

i'm also trying to get a feeling of how i compare with others, and gauge if i need to play catch up, so to speak. not in a competitive sort of way, but in just gauging how i'm doing financially. i appreciate all the posts and replies, and very much enjoy this site.


----------



## Causalien

What you are able to bring in and save as a dentist is more than I am able to achieve with real estate and the stock market up till this point in life. But it's not comparable since I was unfortunate enough to chose the wrong profession at the beginning, so my starting capital for that crucial 10 years is a lot less than you. Compounding kind of takes over after 10 years once the interest income becomes more than anything else you can make in a job (simplified explanation).

I am in the reverse situation as you. My living expenses are completely subsidized by my financial maneuvers while I am scared shitless attempting to startup my own company at the moment. Good luck to you.


----------



## KaeJS

Homerhomer said:


> Few % drop should not make you nervous, if it does it is an indication your portfolio is flawed.


My Portfolio _is_ flawed, and I know that, which is why I am nervous.

I have too much margin and too little diversification. I am overweight in the financial sector. Everytime there is talks of packages, default, currencies, the financials usually drop. So yes, I am looking to change this.

But I still see some bad news:

http://www.reuters.com/article/2011/07/10/us-usa-debt-idUSTRE7646S620110710

Selling everything is looking better day, after day, after day, after day....

I dont think they will default.
But do any of you think they will?

Gonna be a bumpy ride, thats for sure...


----------



## Homerhomer

KaeJS said:


> I dont think they will default.
> But do any of you think they will?
> 
> Gonna be a bumpy ride, thats for sure...


IMO not next month but eventually they will, the **** will hit the fan, the debt can not increase forever, eventually there has to be a drastic change how things are done, we can't run on credit perpetually and expect it to last forever.

The markerts recovered due to money printing, increasing needs of countries like China and India, and for US companies the foreign exchange, there hasn't been any real recovery in the developed world, if lil Greece can cause such a havoc just imagine what the fall of uncle Sam will do ;-)

Hoarding cash is not a bad idea, I just may need a bit more patience than initially thought ;-)


----------



## ddkay

I think the US will default this summer. Iceland defaulted on $85 billion and in less than 3 years returned to the bond market. Russia defaulted on 40 billion in 1998 and they returned to the bond market. Argentina defaulted and returned to the market. A default will make the USD rise to its highest level in 30 years, American's will have significantly more purchasing power than the rest of the world and they can restructure their economy more easily. It might even be the best thing that could happen for American citizens, but commodity and stock market longs will suffer.


----------



## fatcat

> I think the US will default this summer. Iceland defaulted on $85 billion and in less than 3 years returned to the bond market. Russia defaulted on 40 billion in 1998 and they returned to the bond market. Argentina defaulted and returned to the market. A default will make the USD rise to its highest level in 30 years, American's will have significantly more purchasing power than the rest of the world and they can restructure their economy more easily. It might even be the best thing that could happen for American citizens, but commodity and stock market longs will suffer.


 i would say the chances of that happening are about 1 in 20 - maybe 10% at best

obama desperately wants to get a deal done (forget about the quality and smoke and mirrors of any deal that does get done - just getting any deal) and the republicans have small and big business breathing down their neck telling them to get a deal done .. there will be no default ... at least not this year

the usa is not russia - the usa is virtually the economic locomotive that pulls the entire planet along with it

the future is another story - i can see a scenario where, especially in europe and maybe the usa, everyone decides to let it all just go - and then rebuild - who knows ?

i bought some more metals last week and i am mostly in cash


----------



## ddkay

Any hint of inability of the US to issue new debt and pay its creditors will result in a shortage of dollars and a stronger dollar.

So my logic is this: if the US defaults, they can't issue ANY new credit. Therefore its currency will become extremely scarce and expensive.

There is actually very little real cash in the money system, I believe it's 97% credit, so the credit contractions we've seen so far have been very volatile.


----------



## andrewf

The US would be crazy to default. Their debt situation is not even all that bad yet. Their problem is borrowing at a prodigious rate, and that won't be solved by defaulting.


----------



## Toronto.gal

fatcat said:


> i would say the chances of that happening are about 1 in 20 - maybe 10% at best...


Not even that IMHO.

Update from July 11th: 

"THE US is "not going to default," Treasury Secretary Timothy Geithner says, warning Republicans there is "no alternative" to making a budget deal with the White House."

http://www.theaustralian.com.au/bus...-default-on-debt/story-e6frg90f-1226092048318


----------



## Larry6417

I think it's unlikely that the U.S. will default on its debt this summer...but stranger things have happened. Remember, this issue is being handled by *POLITICIANS*, some of whom (esp. the new Tea Party types) don't think a technical default would be all that bad. Who the heck ever accused politicians of a sureit of common sense?


----------



## KaeJS

Like I said, I don't think they will default, either.

But I've got to say; I'm *always* bullish, and for me to be bearish, its scaring myself.

I feel like there are a ton of emotional sellers out there who are going to kill the markets in the next couple weeks, and then when they finally announce that the US will not default and the debt ceiling will be raised, there will be a mini rally back up.

In which case.. do you sell now and buy back in?

And, what would happen to the market if the US did default? Would everyone panic sell and things would be worth only 25% of what they are now?


----------



## Homerhomer

Toronto.gal said:


> Not even that IMHO.
> 
> Update from July 11th:
> 
> "THE US is "not going to default," Treasury Secretary Timothy Geithner says, warning Republicans there is "no alternative" to making a budget deal with the White House."
> 
> http://www.theaustralian.com.au/bus...-default-on-debt/story-e6frg90f-1226092048318


Not this summer and not this year, 2,3 or 5 years from now it's another story (perhaps after Obama is no longer in the office and the new administration will have an excuse to clean up his mess, which is not entirely true but I digress), it may not be called a default but something drastic will have to happen, and no matter what it will be painfull (regardless of the fact of how necessary it may be ).


----------



## fatcat

> Any hint of inability of the US to issue new debt and pay its creditors will result in a shortage of dollars and a stronger dollar.
> 
> So my logic is this: if the US defaults, they can't issue ANY new credit. Therefore its currency will become extremely scarce and expensive.


i would say gold and the metals and oil would be the place to be in that case

if the whole thing really went bad people would be dumping treasury notes right and left and there wouldn't be enough buyers

let's also remember that for many large players there is nowhere else to go but the usa, so perhaps nothing would happen, (at least after an intitial panicked round of selling) people might just hold the debt assuming that the usa would work things out and at some point issue a guarantee of all outstanding debt

so the chinese get mad and decide they want to sell a trillion dollars worth of usa debt ... 1) who is gonna buy it ? ..... 2) where are the chinese going to put the trillion dollars they get from selling us paper ? ... europe ? canada ? i doubt it ....


----------



## ddkay

Except credit destruction happens faster than you can pump oil or mine all the gold in the world. So in the short term, if a default does happen, it's probably better to be holding USD cash. I.e priced in USD you would see $250 gold before you see $6000 gold. The flight to safety still holds true. The USD would be scarce, but not as scarce as precious metals - so relative to everything else, it's probably still the best currency for transactions/international trade. The Canadian dollar is linked to commodity prices, so it would be worth less relative to the USD. The future the Euro depends on their ability to keep all member countries solvent and using the same currency, which as we can see is an extremely difficult thing to do... I think USD cash will be safest. Just my opinion though.


----------



## Argonaut

There is no way a strong USD will be a possible outcome of the debt situation. I say something less than hyper-inflation, maybe super-inflation. Gold is the place to be. Along with strong dividend paying companies, and some cash in a savings account for safety/opportunity.


----------



## Eder

If I was an American I would be ashamed of the ridiculous antics of all their elected politicians. Do they take stupid pills down there?


----------



## ddkay

@Argonaut, you can't have a default and inflation at the same time. If a default did occur I think all the stuff I said about dollar strength and equities and gold weakness would be true. The point of inflation is to avoid or prolong default. So, there's few exits out of a debt crisis, it's either temporary inflation with hopes of temporarily spurting growth enough to pay debt faster, restructuring, hyperinflation and then default, or straight up default (two roads lead to the same destination).


----------



## Argonaut

I'm not following your train of thought. Who was better off in Weimar Germany or Argentina.. the guy with the wheelbarrow full of cash or the guy with gold? And I don't think the US will default either. Just looks like a whole bunch of inflation and devaluation to me, until it all comes out in the wash. The thing about these "crises" is that they're not tangible. It's not like a massive crop failure or a pandemic. If everyone forgot about it, it wouldn't exist.

_Disclaimer: But I certainly don't condone the mess that the US has put itself into, being someone who is extremely frugal with no debt._


----------



## fatcat

ddkay. first, let me say that you may well be correct

i don't know what would happen and i don't think anyone does

as you know a huge amount of what happens with regards to money and investing is based on perception ..

i find it hard to believe that the us dollar wiuld be a desirable place to be

there may not be enough oil or enough gold but the oil and gold and silver and other metals could be priced to the moon .

people will be asking "what can i own that will hold its value ?" i just don't see the us dollar as being the answer to that question

but, i really have no idea, i hope we don't have to get an answer to the question ...


----------



## HaroldCrump

The US won't default on its debt as long as there are buyers for their currency.
They can simply go on meeting their debt servicing obligation by printing more and more money and selling it to the rest of the world (China, Middle East, Japan, etc.)
This also ensures that they can print their way out of the underfunded liabilities such as social security, pensions, etc.
If/when the buyers of the USD decide that 'nuff-is-nuff, that's when the shoe will drop.
It is very ironical that the European debt crisis emerged and unraveled just when the above situation might have arisen.
The European debt crisis has ensured that, at least for now, the USD continues to enjoy its reserve currency status.


----------



## Toronto.gal

+1 Harold.


----------



## humble_pie

_" The US won't default on its debt as long as there are buyers for their currency."_

this is always the anguish. The biggest holders by far of US currency are the chinese. Treasury bills. So the agony is always What If They Dump.

would make 2008/09 look like a garden party for kate & william.


----------



## Toronto.gal

An interesting article from last year.

"The conventional wisdom is that China would never just dump U.S. Treasury bills since it would end up boomeranging right back on Beijing. By selling off U.S. debt, China would depress the value of its own national wealth and undermine its most important trading partner."

Read more: http://curiouscapitalist.blogs.time.com/2010/02/26/will-china-dump-u-s-debt/#ixzz1RoeJNxWm

*hp:* as you would say, que sera sera [mais en français]


----------



## Larry6417

I agree that the USD will be the reserve currency for some time, but that doesn't mean it's a great currency to own. For example, the greenback has fallen against the Swiss franc for 40 years despite being the world's reserve currency. See http://forecastchart.com/usd-swiss-franc.html


----------



## Abha

Larry6417 said:


> I agree that the USD will be the reserve currency for some time, but that doesn't mean it's a great currency to own. For example, the greenback has fallen against the Swiss franc for 40 years despite being the world's reserve currency. See http://forecastchart.com/usd-swiss-franc.html


We'll all be dead for a long time before the USD is ever debased on a global scale. 

There will be blood to pay for this economic mess, but it won't be our generation. Rising populations, scarcer resources and perilous economic currencies will greatly affect those who are not even born yet.


----------



## KaeJS

I don't like to "+1" things, but everyone is a hypocrite sometimes, right? 



Eder said:


> If I was an American I would be ashamed of the ridiculous antics of all their elected politicians. Do they take stupid pills down there?


+1. Really though, they are taking some good pills.



Argonaut said:


> The thing about these "crises" is that they're not tangible. It's not like a massive crop failure or a pandemic. If everyone forgot about it, it wouldn't exist.


+1. Kaboom. Argonaut speaks truth.


----------



## HaroldCrump

Abha said:


> We'll all be dead for a long time before the USD is ever debased on a global scale.


Ah, but it has been happening right under our noses, for many years now.
While we have been going gaga over dot com stocks, then biting our nails during the "war on terror", then getting high on the RE boom, and so on...
It is the classical magician's trick.

As someone recently said to me:
_The fog crept in
on little cat feet_


----------



## fatcat

> this is always the anguish. The biggest holders by far of US currency are the chinese. Treasury bills. So the agony is always What If They Dump.
> 
> would make 2008/09 look like a garden party for kate & william.


 pie, i hear this brought up a lot but this just is not going to happen ... 

holding a trillion dollars worth of treasury bills is the ticket price to get the us government to look the other way on human rights, allow the renmimbi to be pegged and not float and especially to encourage us consumers to buy chinese goods at cheap prices ... 

also they have nowhere else to put the money ... 

the chinese are not doing anything out of the goodness of their heart .. 

they are stuck, they need the usa every bit as much as the usa needs them and maybe even more .. 

there are at least 200 million unemployed angry peasants in china and millions more that are underemployed .. 

they must have western markets to stoke their economy ... 

when they grow large enough to float their own economy on their own internal purchases then i agree it might be another story but even then i doubt it ... 

a trillion is what it costs to purchase washington dc and all the people that work there


----------



## Belguy

For anyone who missed the panel discussion on 'The National' last night, the conclusion for an ideal portfolio, given the current world economic situation, is 50% gold, 50% canned goods with perhaps a little set aside for a gun to protect the canned goods.

They felt that the European credit mess was of greater overall concern than the situation in the U.S. because it almost defies a solution and so many things could go wrong--especially if it spreads to larger countries like Italy!!


----------



## dubmac

Belguy - I know that they said 50% gold & 50% canned goods, but my perception was that they were using hyperbole- an extreme example to garner interest and discussion in their program. I also recall the experts saying (in the event things in Europe get worse, the Euro crashes and more defaults ensue), that one should look for good blue-chip stocks available at low prices, and that one should "trim" their holdings in any Europe-focused equities or funds.


----------



## avrex

Belguy said:


> For anyone who missed the panel discussion on 'The National' last night


Here is that video clip.
With financial woes in Europe and escalating debt and tensions in the U.S., how concerned should you be about your financial future?


----------



## ddkay

The trouble with the world is that the stupid are cocksure and the intelligent are full of doubt. - Bertrand Russell


----------



## fatcat

> For anyone who missed the panel discussion on 'The National' last night, the conclusion for an ideal portfolio, given the current world economic situation, is 50% gold, 50% canned goods with perhaps a little set aside for a gun to protect the canned goods.
> 
> They felt that the European credit mess was of greater overall concern than the situation in the U.S. because it almost defies a solution and so many things could go wrong--especially if it spreads to larger countries like Italy!!


 i agree with that ... the difference between the usa and eurozone is that the usa is basically a single entity with an ongoing disagreement but they are united by a single flag ... the eurozone is a patchwork of unequal economies with only the vague idea of being "europeans" in common ... i think it is much more dangerous situation


----------



## gibor365

fatcat said:


> ...the usa is basically a single entity with an ongoing disagreement but they are united by a single flag ... the eurozone is a patchwork of unequal economies with only the vague idea of being "europeans" in common ... i think it is much more dangerous situation


It's funny, but during World War II, the only 3 big countries that weren't occupied buy Nazis were Great Britain, Switzerland and Sweden... and now this 3 countries are not in "euro-zone" 

Still think that Germans won't allow that any country will leave Euro...


----------



## Belguy

As the linked article suggests, don't expect your portfolio to post much in the way of gains over the next ten years (think the Japan experience over the past several years!). After that, and about the time that I turn 80, things MAY start to improve.

http://www.theglobeandmail.com/glob...-on-a-fast-track-to-the-1970s/article2103987/

And so, how to invest going forward.


----------



## kcowan

Belguy said:


> ...And so, how to invest going forward.


Stcik to things that will have demand in spite of prices.
- commodities
- oil
- technology
- health care
- BRIC

Avoid things that will be adversely impacted
- retail
- financial services
- industrial

I am ambivalent on real estate. While inflation should drive the prices up, stagnation will prevent the buyers from affording it. Maybe niches like resort properties where people make a commitment to avoid being priced out?


----------



## andrewf

Belguy, you need to stop worrying. I would take ten year market forecasts with a wheelbarrow of salt. You have forecasts running the gamut of -75% to +300% return in that time. It's all just noise.


----------



## Argonaut

gibor said:


> It's funny, but during World War II, the only 3 big countries that weren't occupied buy Nazis were Great Britain, Switzerland and Sweden... and now this 3 countries are not in "euro-zone"


Spain. It's only the second biggest country in Europe. And Portugal too. It's bigger than Switzerland.


----------



## Toronto.gal

Yes Argonaut, but the currency of Spain & Portugal is the euro; not so with the UK/Switzerland and Sweeden & that had been gibor's point I think.


----------



## Argonaut

Toronto.gal said:


> Yes Argonaut, but the currency of Spain & Portugal is the euro; not so with the UK/Switzerland and Sweeden & that had been gibor's point I think.


But what I'm saying is that they weren't occupied by Nazis, and they have the Euro. So his analogy doesn't make sense.

Also, Poland, the Czech Republic, the former Soviet states, parts of Russia, Norway, and Denmark were occupied by the Nazis. And none of them have the Euro.

I'm sorry for tearing down your point gibor, but I can't let that slide with a history degree!


----------



## Toronto.gal

I could say some explosive comments about Spain & Portugal with respect to that issue, but I'll refrain. 

I get your history point!


----------



## gibor365

Toronto.gal said:


> I could say some explosive comments about Spain & Portugal with respect to that issue, but I'll refrain.
> 
> I get your history point!


Spain and Portugal were pro-Nazi with their dictators Franco and Salazar. Poland and Czech Republic were never offered to have EURO, as well as former Soviet republics...

If you wish I can re-phrase, 3 biggest country who stayed really neutrl during the War, refused to have EURO


----------



## Toronto.gal

gibor said:


> Spain and Portugal were pro-Nazi


Exactly what I meant, thanks for spelling it out! 

Welcome back by the way. Hope you had a good holiday, but by chance, did you bring the EU heat back with you? 

Another CMF member came back from hot Thailand, so maybe it's because of you two that we're suffering here.


----------



## gibor365

Toronto.gal said:


> Exactly what I meant, thanks for spelling it out!
> 
> Welcome back by the way. Hope you had a good holiday, but by chance, did you bring the EU heat back with you?
> 
> Another CMF member came back from hot Thailand, so maybe it's because of you two that we're suffering here.


Acually weather in France was pretty good.  In Paris/Loire Valley about 22-25 degrees, sunny, no rain.
In Brittany, Normandy, Picardy was even cold, temp 16-20 and 2 rainy days...but here in GTA , was very hot, all my grass is yellow now 

BTW, probably you know that "The Blue Division (Spanish: División Azul, German: Blaue Division), officially designated as División Española de Voluntarios by the Spanish Army and 250. Infanterie-Division in the German Army, was a unit of Spanish volunteers that served in the German Army on the Eastern Front of the Second World War."


----------



## HaroldCrump

Toronto.gal said:


> I could say some explosive comments about Spain & Portugal with respect to that issue, but I'll refrain.


What's that saying...old sins cast long shadows.
It is not just the Nazis.
Prior to that...the pillage of the Incas, the Mayans, the butchering of the native Americans.
Centuries and centuries of untold horrors.


----------



## Toronto.gal

*Harold:* 

I did not pick these 2 countries out of thin air, nor did I even start the topic, it came up in the discussion as you read. 

It's perfectly fine to discuss any history IMO so long as facts are accurate.

Of course there are countless horrors in history; past & present from one corner of the world to the next.


----------



## Toronto.gal

gibor said:


> 1. In Paris/Loire Valley about 22-25 degrees, sunny, no rain.
> In Brittany, Normandy, Picardy was even cold, temp 16-20 and 2 rainy days...
> 
> 2. you know that "The Blue Division (Spanish: División Azul, German: Blaue Division)


1. I'm glad you did not bake while on vacation, but I hear other parts of Europe are suffering like we are.

2. Yes, of course I know. It consisted of about 50,000 volunteers from all over the country; Franco's way of repaying a war debt.


----------



## Argonaut

gibor said:


> If you wish I can re-phrase, 3 biggest country who stayed really neutrl during the War, refused to have EURO


I don't know what your definition of neutral is.. but the leader of the Allies for most of the war probably shouldn't fit it. United Kingdom, neutral??

Spain was friendly to the Axis, and Portugal friendly to the Allies, but both officially neutral. I guess the final point is that where the Nazis were in World War II has nothing to do with who has the Euro. Seriously. Nothing. It would be much easier to make Cold War analogies.

Anyways, you should all pass some summer this way.. the west coast has been really lame.. worst summer in years. I want 30+ heat please.


----------



## Toronto.gal

You want heat, no problem, how about 15 degrees extra for you?


----------



## gibor365

Argonaut said:


> I don't know what your definition of neutral is.. but the leader of the Allies for most of the war probably shouldn't fit it. United Kingdom, neutral??
> 
> Spain was friendly to the Axis, and Portugal friendly to the Allies, but both officially neutral. I guess the final point is that where the Nazis were in World War II has nothing to do with who has the Euro. Seriously. Nothing. It would be much easier to make Cold War analogies.
> 
> Anyways, you should all pass some summer this way.. the west coast has been really lame.. worst summer in years. I want 30+ heat please.


Only official.... BTW, Denmark also was officially neutral...

I wouldn't say that GB was the leader of Allies.

OK, let's re-phrase again..."really neutral countries and allies" 

BTW, if I were for example Swedish citizen I'd also vote against joining to EURO, and one of the reasons would be the History.
Now, you will se how much Greece will be own to Germany...and who is next?!
Maybe 4th reich is coming by economical, not military , means?


----------



## Toronto.gal

gibor said:


> OK, let's re-phrase again..."really neutral countries and allies"


Give it up.


----------



## Belguy

I don't mean to interrupt the history lessons and travel info but those teapartiers down in the States are starting to get on my nerves. They seem totally unwilling to compromise and may be prepared to push the U.S. over the edge with a goal of getting rid of Obama when the next election rolls around. Are they really prepared to risk a downgrade in the country's credit rating and all of the consequences of that, including the resulting turmoil in the stock markets around the world for their selfish aims? Time is fast running out!!


----------



## humble_pie

don't worry belguy they will fix this up temporarily.

gibor who do you think was the leader of the allies ?

let's not even bother with stalin ...


----------



## KaeJS

humble_pie said:


> don't worry belguy they will fix this up temporarily.


This post was so blunt, yet charming and calm.

You could almost say that it was *humble*.

And, very well said, indeed.

They will fix it.


----------



## gibor365

humble_pie said:


> gibor who do you think was the leader of the allies ?
> 
> let's not even bother with stalin ...


You answered already on your own question.

I think you know when started the war and when started Normandy invasion!
and imho without US , 2nd language in all western Europe would be Russian


----------



## humble_pie

gibor here is a funny story about russians with, ah, shall we say, _large views _about their national importance.

there was a period when the russian aristocracy had a mania for french style, as you know.

so one day catherine the great was bragging to the french ambassador about how the waterworks & pools in the french style gardens of her palace were so much bigger & so much deeper than the waterworks at versailles, after which they had been patterned.

why only this morning a manservant of mine drowned in my fountain pool, said the russian empress.

madame he was a flatterer, said the french ambassador.


----------



## Argonaut

For all but the last year of the war the UK was leader of the Allies. For a date when the USA became the leader you could either say June 6th 1944, or after the Battle of Normandy when Montgomery gave up command of the ground forces. 

The Soviet Union was not a member of the Allies. There was a degree of cooperation between the Allies and the USSR, based on their common enemy. The Churchill quote is apt, "if Hitler invaded hell I would at least make a favourable reference to the devil in the House of Commons". There are a number of reasons they shouldn't be considered part of the Allies, but the most telling one is that they had a neutrality pact with Japan. However, I am willing to admit that the Soviet Union did have the biggest role in the defeat of Germany. But you certainly can't call them one of the "good guys".

Think "Allied Invasion of Normandy" and "Allied Invasion of Berlin". One of them doesn't sound right.


----------



## Toronto.gal

Argonaut said:


> I am willing to admit that the Soviet Union did have the biggest role in the defeat of Germany. But you certainly can't call them one of the "good guys".


You can say that again [the latter part]. Hope Harold won't come after us.


----------



## HaroldCrump

Toronto.gal said:


> *Harold:*
> 
> I did not pick these 2 countries out of thin air, nor did I even start the topic, it came up in the discussion as you read, but I knew reactions like yours would follow.


I know (that you didn't randomly pick these two and you didn't start the topic either.).
I merely put into words what you weren't saying.

I should perhaps clarify that I am in no way holding the current generation of Spaniards and Portugese responsible for the actions of their forefathers centuries ago.

Regarding Stalin, no worries...I'm not gonna throw you guys into the Gulag labor camps.
Incidently, I have read many of Stalin's early works on the plan based economic models, demand and supply regulation, etc.
This was from the time he was still under the shadow of Lenin.
But this man was not a mad fool like Hitler, although it certainly seems so in light of history.
Compare his writings/thoughts with the senseless ramblings in _Mein Kampf_ and you'll see what I mean.


----------



## gibor365

humble_pie said:


> gibor here is a funny story about russians with, ah, shall we say, _large views _about their national importance.
> 
> there was a period when the russian aristocracy had a mania for french style, as you know.
> 
> so one day catherine the great was bragging to the french ambassador about how the waterworks & pools in the french style gardens of her palace were so much bigger & so much deeper than the waterworks at versailles, after which they had been patterned.
> 
> why only this morning a manservant of mine drowned in my fountain pool, said the russian empress.
> 
> madame he was a flatterer, said the french ambassador.


I hope that you will see and compare (or maybe you've seen already?!), "waterworks & pools " in Versailles
vs Czarskoe Selo (St Petersburg suburb).  I did.


----------



## gibor365

Argonaut said:


> However, I am willing to admit that the Soviet Union did have the biggest role in the defeat of Germany. But you certainly can't call them one of the "good guys".


And whom do you want to call "good guys"?! GB or France who sold Czechs to Hitler?!


----------



## Toronto.gal

HaroldCrump said:


> Regarding Stalin, no worries...I'm not gonna throw you guys into the Gulag labor camps.


Phew, that's certainly a relief! 

My apologies Harold, I had read your previous post rather quickly & hence misunderstood it completely. 

Indeed, no intelligent person would blame current generations for past horrors, but it sure does freeze the blood when reading/studying those periods; human evil as well as concrete evidence of *voluntary participation* in such horrors, is simply beyond my comprehension, no matter how much I read and how much I try to understand the psychology of evil.

Not in the mood to talk about Hitler or Stalin, but I know what you meant.

I read this comparison last night:

http://www.nybooks.com/articles/archives/2011/mar/10/hitler-vs-stalin-who-killed-more/


----------



## humble_pie

*national pride*

when we lived in france my 8-year-old used to come home from school with some interesting takes on history as seen from deep within the heart of provincial france.

"the french won World War II," my kid told me, "monsieur daigneault said so."

monsieur turned out to be right about denim, though. This cloth was indeed first woven in the south of france. Originally it was tissu de nîmes.


----------



## zylon

*off topic - with profuse apologies to OP*

As one who had great difficulty staying awake during History, aka "Social Studies" classes, and barely passed with 60% grade based mainly on my good looks, I won't venture any sort of opinion.

But I did find this audio interesting:
http://www.lewrockwell.com/lewrockwell-show/2011/07/12/209-myths-of-world-war-ii/


> Eric Margolis leads Lew Rockwell through the murky distortions surrounding the Great Catastrophe to show that it was not the good vs. evil conflict as official propaganda would have it.


----------



## andrewf

Kind of like how America won the War of 1812, and has never lost a war?


----------



## Belguy

U.S. talks collapse!!!

http://www.washingtonpost.com/busin...rand-bargain/2011/07/22/gIQAzskYTI_story.html


----------



## KaeJS

Belguy said:


> U.S. talks collapse!!!
> 
> http://www.washingtonpost.com/busin...rand-bargain/2011/07/22/gIQAzskYTI_story.html


Belguy, the U.S. did not talk collapse at all.

Read: 

Obama says: “They’re going to have to explain to me how it is that we are going to avoid a default,” he said. He later said he was confident that a default could be avoided.

Boehner agreed with that last point at least, saying, “No one wants to default on the full faith and credit of the United States, and I am confident that we will not.”


----------



## KaeJS

And sure, the US economy is weak, but who is this Boehner guy?

Raise the taxes a little... holy crap. Enough is enough. It won't kill anyone to raise the taxes a little, they just wont be able to supersize their MCD.

And by the looks of MCD's stock price, they're doing just fine.


----------



## Belguy

The talks between the congressional Republicans and Obama collapsed!! Now, the Republicans are going to try to hammer out an agreement between themselves and the Democratic led Senate. If that fails, I don't see how they can avoid default. We are one giant step closer to the abyss!!


----------



## ddkay

KaeJS said:


> He later said he was confident that a default could be avoided.


He's been confident that a default could be avoided for the last 3 months... What else do you want him to say? For a little context that answer was given in response to what he could say to Wall Street given the string of bad news tonight and sounding pessimistic at the beginning of his speech.

Obama: "Wall Street will be opening on Monday and we'd better have some answers during the course of the next several days."


----------



## fatcat

a deal will get done ...

it will be a non-deal deal but it will raise the ceiling for a certain window

boehner and the gop have all of their constituents (wall street and the chamber of commerce) hammering away on them to get something done

this is standard emphatic denial that you are fed up and going home that always happens right before you throw in the towel and agree

they have to play to their respective bases


----------



## Belguy

Memories of 2008:

http://www.theglobeandmail.com/glob...ons/article2106929/singlepage/#articlecontent

Those who do not learn from history are doomed to repeat it.  

Have a well balanced and diversified portfolio and don't take on more risk than you can handle--and you probably can't handle as much risk as you think you can!


----------



## Toronto.gal

Belguy said:


> Memories of 2008:


It taught me to mind my own business, as in becoming a DIY investor & what a great & liberating decision that was!


----------



## KaeJS

ddkay said:


> He's been confident that a default could be avoided for the last 3 months...


And imagine, as President of the United States, how bad that will make him look if the US defaults.

I still believe they will not default.


----------



## Homerhomer

KaeJS said:


> And imagine, as President of the United States, how bad that will make him look if the US defaults.
> 
> .


The goal of every republican is to make Obama look bad, that's about half of USA ;-)


----------



## peterboro31

I will never figure out the thinking(?) of the average investor.

We hold Rogers in our portfolio; Rogers beat the street today, but the stock price is getting hammered.

We hold both BNS and TD; both are getting hammered; we thought the debt crisis had USA impact, but it appears if the USA financial sector is down the Canadian sector also gets hammered for some reason.

Has anyone heard any word from Flaherty or the Bank of Canada govenor re impact on Canada re possible USA default?


----------



## fatcat

> And imagine, as President of the United States, how bad that will make him look if the US defaults.


 kaeJS, he can only sign what congress brings forward ... when this happened in 94', the republican congress took most of the blame


----------



## Belguy

International diversification just doesn't seem to be all that it used to be. The world seems to be tied together such that if there is a sudden uprising in Swaziland, stock markets around the world take a tumble. That said, Canada's economy is still tied closely to our largest trading partner, the U.S. and so what happens there usually affects our markets.

The thing that I keep coming back to is, given the economic climate in the world today, should our hard-earned savings even be in the stock market??!!

There is a commercial on TV these days where an investor bemoans the fact that the stocks that he has chosen have all been dropping in value. His friend's advice is to not invest in the stock market in the first place and this would not happen!!

So often now, it seems like, if you want to be a stock investor, you've got to have an iron stomach and nerves of steel or, at the very least, money that you can afford to lose in the short term on paper.


----------



## kcowan

Belguy said:


> ...So often now, it seems like, if you want to be a stock investor, you've got to have an iron stomach and nerves of steel or, at the very least, money that you can afford to lose in the short term on paper.


The best approach is to ignore the valuations until it is time for your regular rebalancing. Especially if you have a heart condition!


----------



## peterboro31

http://www.bnn.ca/News/2011/7/26/US-debt-situation-very-worrisome-Flaherty-.aspx


----------



## blin10

peterboro31 said:


> *I will never figure out the thinking(?) of the average investor.*
> 
> We hold Rogers in our portfolio; Rogers beat the street today, but the stock price is getting hammered.
> 
> We hold both BNS and TD; both are getting hammered; we thought the debt crisis had USA impact, but it appears if the USA financial sector is down the Canadian sector also gets hammered for some reason.
> 
> Has anyone heard any word from Flaherty or the Bank of Canada govenor re impact on Canada re possible USA default?


average investor makes up VERY small % of the daily volume, most of it traded by the big boys..


----------



## ddkay

So some people think this is going to be like the Recession of 1937-1938, where government austerity reversed the recovery from the 1929 crash & keynesians blamed the cuts in federal spending and increases in taxes.










"During this recession, the unemployment rate rose to 20%, the economy's output fell 18%, and industrial production dropped 32%. The climate leading to this recession is very similar to the economy today. Then, as now, commodity prices were rising rapidly and inflation fears were growing. Federal budget was criticized as too large and the president was perceived as anti-business. Similar complaints exist today. However, there are some significant differences between then and now. Policy reversal in 1937-1938 was much more drastic than anything being considered today. The federal deficit fell from 5.5% to .1% of GDP between 1936 and 1938. Today's budget deficits are much larger as a share of GDP and prospective reductions are much smaller."

Of course the other difference is there weren't dozens of emerging economies with billions of people, and the US didn't have to worry about being left behind in dust to them.

The US Commerce Department is releasing GDP numbers on Friday morning at 8:30. This will move the market... definitely the most important data on the docket this week. The estimate is for GDP growth is 1.9%.


----------



## ddkay

Playing around with Prophet Charts in thinkorswim, didn't know they had data going back to the 1900's. Here's what how long it would to recover (discounting inflation) if you bought the peak of the S&P500 in 1929. It would have sucked if you needed to cash out before 1954. This is where dividends really help, you might have broken even in almost half the time if dividend yield roughly matched the rate of stock price growth. Waiting 12.5 years isn't possible for everyone though... I could see even young people becoming impatient with _The Lost Decade or Three._


----------



## Abha

It's a blood bath out there coming right off the open.

Did not expect to see it this red this fast.


----------



## webber22

Hopefully *dentist101* the OP is still scared and hasn't invested yet 

Each day that passes the markets are dropping about 1%. If a deal is reached the most upside would be 1% each day imo. So the best play is to wait for the outcome and buy in if a deal is reached.


----------



## Belguy

I expected a 500 point drop in the Dow last Monday if there was not compromise in the U.S. That didn't happen on that day but we are getting there for the week with smaller drops each day.

I heard someone say today that investors should remain "prudent" whatever that means?


----------



## ddkay

S&P500 key support levels

1311 Fib Level 1.00
1307 50 DMA
1305 150 DMA
1302 Fib Level 1.618
1288 Fib Level 2.618
1291 Last Week's Low
1278 200 DMA
1274 Fib Level 2.618
1265 Fib Level 4.250
1256 2011 Low


----------



## Jungle

Belguy said:


> I expected a 500 point drop in the Dow last Monday if there was not compromise in the U.S. That didn't happen on that day but we are getting there for the week with smaller drops each day.
> 
> I heard someone say today that investors should remain "prudent" whatever that means?


Stay on course.


----------



## ddkay




----------



## Belguy

Holy crap!!! Iceberg ahead!!! Hard to starboard!!!


----------



## Abha

Belguy said:


> Holy crap!!! Iceberg ahead!!! Hard to starboard!!!


For those who can stomach it, just pretend that iceberg is a pile of money. 

People have really short memories when it comes to investing. Just go back and revisit the market fears during the TARP vote.


----------



## Causalien

Wait for Monday. This thing will get dragged out politically to have the maximum effect. Nothing will rise until this is resolved. Look at Visa. Great solid report. Down 2%.


----------



## dentist101

@webber22 - well, i have invested (put $100k in a 50/50 stock/bond allocation in may '11), but called my advisor on monday and REDUCED my exposure to $50k (in 50/50 stock/bond allocation). the remaining $50k i put into a one-year GIC (i know, i know, only 1.8%, but whatever). so, i'm gonna ride out this craziness until the fall, then rebalance. this $$$ is my RRSP contributions. so, now my RRSP looks like this:

$50,000 - one year GIC
$30,000 - 18 month GIC
$20,000 - money market fund
$20,000 - (un-invested currently)
$50,000 - 50/50 stock/bond market allocation

basically, after 6 months of "introducing" myself to the markets, i have learned a very, very valueable lesson....i now know what my risk tolerance is, and it is LOW. it cost me about $800 to find this out, and i will take that anyday. i also learned that i need to quit watching/worrying about the markets everyday. 

this forum has been very informative for me, and i appreciate all of the feedback.


----------



## KaeJS

^ I lost $687 today alone, and I'm no dentist 

You definitely have a low risk tolerance, but just keep watching the markets. You will see that more often than not, if you are investing in solid companies, that lost money is only temporary. 

You can slowly drop small amounts of capital into riskier investments as you go along. Drop $5,000 in a riskier fund and see how it works for you.

At least you know the maximum you can lose is only $5,000, and thats if the asset went to zer0.


----------



## dentist101

@kaejs - thanks, that's my plan actually. i've just put $15,000 of my TFSA into a Credential Direct Online brokerage account, and i'm gonna use this (or at least a part of this - maybe $5000) to try to put together a portfolio in some solid companies or index ETFs

i may, tho, wait a few weeks before i dive in, ha! this political/financial volatility drives me nuts!


----------



## Abha

Lol @ dentist

You've definitely made the right play being in GIC's and bonds

I'm at the furthest end opposite your risk profile. I laugh because I think about some of my losers languishing in my portfolio right now.

I'm down like $24,000 on Ford alone. That being said, I have a lot of faith in that company and am waiting for it to base so I can add more. 

But I have an iron stomach and I love investing so I take the good with the bad.


----------



## KaeJS

Abha said:


> I'm down like $24,000 on Ford alone. That being said, I have a lot of faith in that company and am waiting for it to base so I can add more.


Now, that's a little bit on the insane side. 

I think I sold out of F at $14.66, and my loss was only ~$400.

However, there are lots of people that have faith in Ford. They may end up getting that share price up in the future. I think T. Gal bought in a few months ago when I sold... Don't know if she still has her shares or not.


----------



## Abha

KaeJS said:


> Now, that's a little bit on the insane side.
> 
> I think I sold out of F at $14.66, and my loss was only ~$400.
> 
> However, there are lots of people that have faith in Ford. They may end up getting that share price up in the future. I think T. Gal bought in a few months ago when I sold... Don't know if she still has her shares or not.


It's a winner, a guaranteed $20 stock. As for getting there, hopefully it can make a speed run going into December but I've extended that a bit into March 2012.


----------



## ddkay

Autos are like airlines and the postal service, really capital intensive and negative correlation with high oil prices + urbanisation (public transportation) + telecommunication. I hope you get that $$ back soon. In hindsight that would have been an amazing pick at $1.50 a few years ago.


----------



## Abha

I'm not worried about the loss. I'm in the green overall but I was just pointing out how different I am to the dentist and that we are on opposite ends of the spectrum.

Yeah Ford would have been a steal back then. Oh well, always an opportunity somewhere. Just have to find them


----------



## humble_pie

those diagonal call spreads in ford - what mode likes to call voodoo - just got so much better.

buy F 2013 jan 10 calls at 3.45.
sell F 2012 jan 14 or 15 calls for .59 or .37 respectively.

cost of spreads 2.86 or 3.08 respectively.

gain if exercised 40% or 62% respectively.
annualized 27% or 41.56% respectively.

abha would say just go ahead & buy the 2013s, don't bother with the 2012s.

i have an iron stomach too but i like a little bitter with the sweet, a little oil with the vinegar, a little pie with the crust, a little short with the long, a little hedge with the garden.


----------



## Toronto.gal

humble_pie said:


> i have an iron stomach too but i like a little bitter with the sweet, a little oil with the vinegar


Lol, but hmmm, you sound just like me. 

*Abha:* so you're a Ford believer! Me too [and I drive one as well].  I'm still in the green as I bought the majority of shares for about $10, but have accumulated since. You're right about being a $20 stock, then you'll be laughing all the way to the bank and KaeJS will be very jealous & sorry for having dumped his shares. 

*dentist:* I would recommend the book 'One Up On Wall Street' as there are examples that I think might ease your fears just a lil.


----------



## Homerhomer

Abha said:


> It's a winner, a guaranteed $20 stock..


If I had a dime for every guarantee that failed on the investment forum I would be much richer ;-)


----------



## Toronto.gal

*Homerhomer:* it came very close to being a $20 stock last year; I had sold a portion at $17+, now of course I wish I had sold them all and gotten back in, but anyway, as you always say, if only we could have that crystal ball.


----------



## Abha

Homerhomer said:


> If I had a dime for every guarantee that failed on the investment forum I would be much richer ;-)


I base that $20 valuation on fundamentals. Look deeper into the company you'll see.

That's why I am so frustrated with Ford.

In the interest of transparency, I am long Apple, Ford, Goldman Sachs and Abbot Laboratories in my main long account.

Those positions I never sell and keep adding on any weakness. If Ford slips under $10 I'll cut Abbot and move everything to Ford.


----------



## Homerhomer

Abha said:


> I base that $20 valuation on fundamentals. Look deeper into the company you'll see.
> 
> That's why I am so frustrated with Ford.
> 
> In the interest of transparency, I am long Apple, Ford, Goldman Sachs and Abbot Laboratories in my main long account.
> 
> Those positions I never sell and keep adding on any weakness. If Ford slips under $10 I'll cut Abbot and move everything to Ford.


We all base our based on something, it's the guaranteeing I find interesting ;-).

Then in one sentence you say you will never sell Abbot, but you will sell if Ford gets weaker, I am just a bit confused here ;-)

I wish all of you good luck with Ford and any other investments, it may go past $20 for all I know, but it's not guaranteed, it may visit $2 before that, all I hear is unions wanting bigger pie of the profit and the input costs going up with US economy slowing. Let's hope asians scoop up lots of Fords ;-


----------



## Abha

Homerhomer said:


> We all base our based on something, it's the guaranteeing I find interesting ;-).
> 
> Then in one sentence you say you will never sell Abbot, but you will sell if Ford gets weaker, I am just a bit confused here ;-)
> 
> I wish all of you good luck with Ford and any other investments, it may go past $20 for all I know, but it's not guaranteed, it may visit $2 before that, all I hear is unions wanting bigger pie of the profit and the input costs going up with US economy slowing. Let's hope asians scoop up lots of Fords ;-


Well at some point I'll have to sell. I had a very long timeframe and I have A LOT of conviction in the picks I make.

So if the scenario of Ford sub 10 presents itself I will make a calculated risk and move my funds from one position I feel strong about to another position I feel even more confidence in.

Keep in mind that a lot of these little nuances that I have developed have come from working in the Securities industry.

I don't recommend anyone follow me and that's why I rarely mention what I'm buying or selling.

I never break my one cardinal rule which is to buy or sell on margin. I feel the risks I take are more than enough and I don't need to bet the house on them. 

One summer I saw a guy who had $33 million in his account. Over the course of 8 months, he blew it all margin trading. I remember seeing his face when he had about 550k left. Never want to be in his shoes.


----------



## HaroldCrump

Abha said:


> One summer I saw a guy who had $33 million in his account. Over the course of 8 months, he blew it all margin trading. I remember seeing his face when he had about 550k left. Never want to be in his shoes.


Are you kidding?
Someone with $33M day is day trading on margin?
I find it a little hard to believe.
Maybe he wasn't being exactly truthful with you about either of those numbers.

How did he acquire the $33M to begin with?
Just out of curiosity.


----------



## Abha

He had sold his business and was trading in the futures market. 

I never saw his bank statement at its height but he was a HNWI (High Net Worth Individual) and he definitely came in when he lost pretty much everything and tried to sue the bank, that they should have advised him better.

He was supremely confident in his abilities and traded futures. Not sure what kind.

It's not out of the realm of possibilities. Earlier this year I read that Al Qaeda had tried to game the stock market by playing oil futures. They turned $27 million into $7 million pretty quickly. Also Hedge Funds blow up all the time when they trade on margin.

http://www.registerguard.com/web/bu...n-chicago-investment-qaeda-associate.html.csp


----------



## ddkay

Watch the US vote on the brink of collapse live http://www.c-span.org/flvPop.aspx?src=cspan1&start=22.155&end=-1


----------



## larry81

thanks for the link ddkay, i am watching it


----------



## KaeJS

Thanks ddkay, watching it also.


----------



## ddkay

The senate vote got postponed again.. supposed to happen tonight but they didn't say what time.


----------



## KaeJS

Republicans are effing crazy, man.


----------



## Belguy

The whole sad matter is getting very, very tiring. They deserve whatever they get!! To heck with them all!!

They say that the stock market is resilient. Well, let's hope so with these characters in charge of the U.S. government. A pox on them all!!


----------



## KaeJS

Can I vote John Boehner as the most destructive, clueless, and (hopefully) most hated man of 2011?


----------



## KaeJS




----------



## Belguy

Not a very becoming portrait!! I vote for the Tea Partiers for my choice of dunces of the month--no make that of the year!!

I wonder if any Americans participate in this forum and what they think of their disfunctional government


----------



## ddkay

No vote tonight, for Boehner or Reid


----------



## sensfan15

Excited to see what happens. Could be a great buying opportunity. I know those who depend on their portfolio for retirement might be sweating, but if you have a long term outlook, not that big of a deal.


----------



## ddkay

All the government knows how to do is blow bubbles and destroy them. Why invest when it's all cycles...


----------



## Abha

Alright Belguy I give up. 

Tomorrow is going to be BRUTAL!

I'm going to have to take some losses before the close and try to go to a pretty high cash level. 

Hopefully when I wake up tomorrow this will all be a bad dream and the markets will be fine. Otherwise we really are screwed.


----------



## Argonaut

Abha: hope you bought your puts in the S&P500. I feel safer knowing I have mine. Wish I got more.

Belguy: I have American citizenship and am very disappointed. I would never vote Democrat, but I honestly don't know what the Republicans are doing right now.

Glad that we have a stable government in Canada with a great prime minister. Too bad our markets are so tied to the US.

Canada got its AAA credit rating renewed by Moody's today, passing with flying colours.


----------



## KaeJS

Boom.


----------



## ddkay

Intraday dead cross with no support underneath, luckily bounced off 1284 (200-DMA on the daily). Won't know for sure where this is going until tomorrow.


----------



## larry81

yes, down down down !

bargain time, I AM READY


----------



## Abha

larry81 said:


> yes, down down down !
> 
> bargain time, I AM READY


You might want to wait until Monday otherwise you'll probably be jumping the gun.


----------



## KaeJS

I'm not. Forget bargain time. I've got no cash.

Time for a margin call.


----------



## Abha

KaeJS said:


> I'm not. Forget bargain time. I've got no cash.
> 
> Time for a margin call.


You and millions of other people.

God damn politicians


----------



## ddkay

I propose these to be one of the new world reserve currencies










They're gold AND edible. Just keep them somewhere cool.


----------



## ddkay

The S&P500 futures are still super volatile but it looks like its going to settle at 1290 this am. US GDP growth is due in 5 hours.. that's really the most important data that could move the market before the weekend. Median consensus among 69 economists is 1.8% Q/Q SAAR. Hopefully they come close to that, but GDP forecasts have historically had low accuracy, especially in expansionary periods or before a recession.

Have a happy long weekend everyone.


----------



## Betzy

KaeJS said:


> I'm not. Forget bargain time. I've got no cash.
> 
> Time for a margin call.


So what about an ETF that looks for the bear market, like Horizons BetaPro S&P 500 Bear Plus ETFTSX:HSD are there others like this one to consider for an offset to the chaos??


----------



## Abha

Shorting the market at this point is probably the riskiest thing you can do.

We could turn to the upside so fast your head would spin. Those trading vehicles should only be used if you absolutely know what you are doing.

I know what I'm doing and I still get burned horribly from time to time. A few weeks ago when they were deciding the Greek vote, I had taken the stance that the vote would fail and placed a pretty big bet on FAZ (Financial Bear 3x).

I lost $8000 that day.

I bet against oil not too long ago (ERY) and lost a lot as well. 

Anyways I was in TZA this whole week and it ran up a lot. But to jump in at this point is suicidal.


----------



## larry81

trying to predict the future is a loser game


----------



## Argonaut

Abha said:


> I lost $8000 that day.


You definitely play for keeps, Abha.

Wednesday was the biggest swashbuckling slaughter my portfolio has ever taken, and I lost $300 in my vanilla stock positions. Of course I know it's all relatively percentage-wise.. but money is money!


----------



## Jon_Snow

I literally had my fingers hovering over the computer key that would have transferred 150k of my dormant cash hoard into my TDW account.... the goofs in Washington HAVE to get a deal done, and there will likely be a sizable bounce in the markets once that occurs. It should be a no brainer for me to get into the market right now, especially at these depressed levels.

But what if the US defaults? Just thinking about the bargains to be had has me thinking I might just wait a while longer.

Yeah, market timing is a losers game, but...


----------



## Abha

Jon_Snow said:


> I literally had my fingers hovering over the computer key that would have transferred 150k of my dormant cash hoard into my TDW account.... the goofs in Washington HAVE to get a deal done, and there will likely be a sizable bounce in the markets once that occurs. It should be a no brainer for me to get into the market right now, especially at these depressed levels.
> 
> But what if the US defaults? Just thinking about the bargains to be had has me thinking I might just wait a while longer.
> 
> Yeah, market timing is a losers game, but...


I'm also glad I didn't sell my positions. I was going to sell them around 1pm - 2pm if today was a bloodbath to avoid the major selling at the close.

Weird seeing green today. I really thought after last night that it would be a the mother of all sell-offs


----------



## andrewf

I bought some more XIV at bargain prices today, 15.45. Holy backwardation of the VIX term structure, batman!

http://www.cboe.com/data/volatilityindexes/volatilityindexes.aspx


----------



## Homerhomer

Jon_Snow said:


> I literally had my fingers hovering over the computer key that would have transferred 150k of my dormant cash hoard into my TDW account.... the goofs in Washington HAVE to get a deal done, and there will likely be a sizable bounce in the markets once that occurs. It should be a no brainer for me to get into the market right now, especially at these depressed levels.
> 
> But what if the US defaults? Just thinking about the bargains to be had has me thinking I might just wait a while longer.
> 
> Yeah, market timing is a losers game, but...


Regardless of what happens US is in deep ****, they will raise the ceiling and then what? raise it again few month after, repeat and repeat, then default, or get the spending in order, raise taxes.... either one will lead to fantastic buying opportunities, the only question in my mind not if but when.

Bought a bit of Goldcorp this morning, other than that keeping lots of cash.


----------



## andrewf

The US never has to default. They can print as many dollars as they would ever need. They need to get their borrowing under control not because they will run out of dollars to spend, but because eventually printing money leads to inflation and then hyperinflation and excess inflation is a Bad Thing.

The debt ceiling will be raised. It will be raised again after that. But the US needs to sort out their borrowing problem. Something has to give. They either need to pay more taxes, spend less on their military, or give up some of their entitlements, or some of all three. All three means that they have to experience a real recession as the government takes away the artificial 5-8% of GDP that has been injections of borrowed money. Their dollar will have to be allowed to devalue, and that's something China has more control over than the US. China has been complaining about loose US monetary policy, but they have only themselves to blame. US monetary policy is appropriate for the state of the US economy. If China is experiencing problems because they outsourced their monetary policy to the federal reserve, that is entirely their fault. They are taxing their own people by maintaining artificially low exchange rates, and blowing the proceeds of that tax on investments in US treasuries.


----------



## Belguy

I have been hearing on the media today that today's GDP numbers in both Canada and the U.S. is actually the bigger news than the short term debt crisis in the U.S. These numbers came in lower than most anyone's predictions and at the very least emphasize that we are in an ongoing very weak economy and still face the possibility of a double dip recession if indeed we ever got truly out of the last one. Also, the situation in Europe could result in choppy markets for at least the next ten years!!

As of today, Apple has more cash on hand than does the U.S. government.

http://www.telegraph.co.uk/finance/...e-now-holds-more-cash-than-US-government.html


----------



## ddkay

Bank of America has $332 billion in cash. Their stock doesn't show it though.


----------



## Abha

ddkay said:


> Bank of America has $332 billion in cash. Their stock doesn't show it though.


LOL!

I wouldn't buy BAC with your money


----------



## Causalien

Got my gun lock and loaded.

The math says that if BAC were to liquidate, you'd get all cash and it is trading at half its book value. However, people don't believe in the value of their books or they'd have to suffer about 100 billion of lawsuit loss. It's that simple.


----------



## Abha

Apple has more cash than the US Federal Government.

http://news.yahoo.com/blogs/ticket/apple-more-money-federal-government-163023405.html


----------



## HaroldCrump

^ Nationalize Apple and confiscate all assets - debt problem solved!
Just goes to show how stupid governments (without exception) are, and how they waste their tax payers money.


----------



## Jon_Snow

As I sit here swinging in my hammock, sipping a decent chardonney while gazing out upon the lazily shifting waters of the Strait of Georgia, I can honestly say that I've never been so unsure as to what is going to happen in the markets. I could see a last minute debt deal that could spark markets for the balance of the year, or a default or credit downgrade that could have negative lingering effects... Add in the dismal numbers as related above by Belguy... Good grief.

I understand it would be folly for those already invested to sell at this point, but for someone like myself who is looking for an opportunity to invest up to 200k, when is the right time? I should change my board ID to "The Paralyzed Investor".

I remember being in a similar frame of mind in March 2009... Ah, hindsight. Its all slightly maddening, really.


----------



## HaroldCrump

Jon_Snow said:


> I remember being in a similar frame of mind in March 2009... Ah, hindsight. Its all slightly maddening, really.


Exactly, you have been saying this since 2009.
In the meantime, market corrections have come and gone, mini bull runs have come and gone, dividends and distributions have come and gone...

As they say, the best time to plant an oak tree was 20 years ago. The second best time is now.


----------



## Assetologist

Jon_Snow said:


> when is the right time? I should change my board ID to "The Paralyzed Investor".
> 
> I remember being in a similar frame of mind in March 2009... Ah, hindsight. Its all slightly maddening, really.


The point of maximum pessimism is hard to determine but your internal fear barometer may be tuned well enough. Ultimately averaging in during the period of pessimism is what end up happening.


----------



## larry81

They passed Boehner's Debt Limit Bill 

Breaking news for the doom and gloom crowd: this is not the end of the world !!!


----------



## ddkay

With 0 democrat votes, though, and the bill has to pass senate and Obama next who said earlier this week they would veto it because it doesn't represent "bipartisan compromise". In theory Senate could modify it so democrats could vote in favour.. we'll see... Right now it's still gridlock.


----------



## Jungle

Well it has to go to the Senete, which they could reject.


----------



## daddybigbucks

HaroldCrump said:


> Exactly, you have been saying this since 2009.
> In the meantime, market corrections have come and gone, mini bull runs have come and gone, dividends and distributions have come and gone...
> 
> As they say, the best time to plant an oak tree was 20 years ago. The second best time is now.


my sentiments exactly.

Everything always works out for the better. 

that being said, im sitting at my desk sipping neocitron having a brutal summer headcold. I'll trade places with jon snow right now.


----------



## Abha

This bill means nothing. More theatrics.

I'll bet we see a mini rally and then an even bigger sell off.

Position accordingly and play it safe with your hard earned dollars.


----------



## larry81

As a friendly reminder, this time is NOT different:

http://www.businessweek.com/investor/content/mar2009/pi20090310_263462.htm


----------



## Belguy

The bill that passed in the House will go to the Senate where it will be worked on by Democratic Senate leader Harry Reid and Republican Senate leader Mitch McConnell and that will be the basis of the final compromise that will end up passing both houses.

The Chinese government has labelled what is now going on in Washington as "dangerously irresponsible" and who's to argue?

The Dow has lost 581 points since last Friday and so my earlier prediction of a 500 point drop wasn't far off although I said that would happen in one day that being last Monday. Instead, it took a week to accomplish. This brings to a close the worst week for the markets in a year! Investors have lost a total of 183 billion dollars in equity value in just the last week.

Aside from the debt stalemate, there is really nothing out there to provide much hope for the stock markets for the second half of the year. Basically, the economy is flatlining and so the next few weeks and months do not look particularly promising.

The concern about a double dip recession is alive and well unless you are among those who believe that we never really recovered from the last recession.

Time will tell if we can come out of this year with positive returns in the various indexes but, at this point in time, I'm not betting the house on it!!!


----------



## webber22

During the after hours tsx trading - a rarity, Goldman Sachs and JP Morgan sold off a ton of oil, bank, gold and rim shares during the big block trading. Time to worry?


----------



## ddkay

> Unusually for a head trader -- especially in the summer -- Scott Graham, head of government bond trading at BMO Capital Markets in Chicago, will be cutting his weekend short.
> 
> "*I will come in Sunday night to see if there are any significant customer flows and to offset some of our risk*," he said. "Risk appetite has been cut across the board by most shops."


http://www.reuters.com/article/2011/07/29/us-markets-usa-weekend-idUSTRE76S5RP20110729

Stay bullish guys, someone needs to hold the bags. 

I think this is the end of the cyclical bull market for commodities/equities, interest rates will lower as US Treasuries is probably the only place you can safely park your money and get 95% of it back in the short-term


----------



## webber22

People with heart ailments can now safely leave the thread ....


----------



## ddkay

It sounds crazy, and I don't know if it's practical, but maybe the U.S. is intentionally trying to default so they can get negative interest rates (like Sweden's Riksbank did in 2009), so bondholders owe the government just to hold the a "risk-free" asset. Not sure how long they could pull it off...

Looked at every chart, Thirty-Year, Ten-Year, Five-Year, Two-Year, Thirty-Day. In every case paper value is heading up, yields are heading down, and could possibly continue lower than 2008 levels.


----------



## Homerhomer

webber22 said:


> People with heart ailments can now safely leave the thread ....


Lol, you should send Belguy an email so he accidentally doesn't stumble upon this ;-) You don't want to feel responsible, do you ???


----------



## Belguy

I did just accidentally stumble upon it!!

!!!!

Markets are closed for the next couple of days but next week will be very interesting to say the least!!

Be still my heart!!!

It is at times like this that my 40 per cent bond allocation does it's job to reduce the overall volatility of my portfolio.

My main bond holding is the PH&N Bond Fund D which is up 1.73% over the past 30 days.

Some bond iShares ETF's returns over the past 30 days are:

XCB: +1.99%
XGB: +1.89%
XLB: +3.70%
XSB: +0.83%
XBB: +1.95%

Carefully consider your asset allocation targets when constructing your portfolio. Fixed income investments do serve their purpose--particularly when those periodic crises come along--both uncontrollable and also man made such as the current crisis is.

You have to really know your risk tolerance and times like these will serve to remind you what that tolerance is.


----------



## Abha

LOL

I love this thread. 

But seriously. Lets talk numbers here. Typically one would expect a country with a triple AAA rating to have debt to GDP at about 60%. That is reasonably sustainable and it speaks to good fiscal policy (something that has been lacking for the last decade)

In order to get the United States down to about 60% you would need the Government to cut about $6 trillion dollars in deficit reduction over the next decade.

These numbers need to be maintained and accepted by all politicians and all this talk going around on the TV between the two parties is all smoke and mirrors. 

If I don't see a number close to $6 trillion I will begin to switch all the portfolios I manage and adopt less of a buy and hold to more of intra-month setups to negate the inevitable day when everything crumbles.


----------



## Belguy

Don't look now, but everything may already be crumbling when you take into account the situations in both the U.S. and Europe.

I'm going to bed now and dream pleasant dreams about the stock market!!!


----------



## ddkay

@larry81, great story to prove the point I made earlier - all government knows how to do is blow bubbles and destroy them.

Quote from that 1979 'Death of Equities' article


> Undeniably, the U.S. is in the midst of a *fundamental shift—aided by government monetary and fiscal policies*—away from investment in favor of immediate consumption.
> 
> Housing, in fact, has become the most popular inflation hedge for most Americans. "*For the past five years, real estate has been the equity market that stocks used to be*," points out Allen Sinai, a Vice-president of Data Resources Inc., a leading economic consulting firm.


Then savers were subsidising borrowers, the collapse of the Bretton Woods system and the 'Nixon shock' caused super monetary inflation (dollar devaluation), and people piled into Treasury debt to push down prime interest rates which were as high as 11%. Now, I think it will be the reverse, negative prime interest rates, where lenders subsidise borrowers and savers through interest paid to Uncle Sam.

We don't really have dollar devaluation now, the money that's been printed only offset the credit destruction from 2008, there's price inflation but I think that's just the result of the commodities/equities bubble Bernanke helped create.

Anyway, I just don't see how this market can go any higher. You can't have 9.2% unemployment and a stock market outperforming at the same time corporations ship jobs to other countries. Whose side is the government on? It's just not sustainable..


----------



## HaroldCrump

Belguy said:


> Fixed income investments do serve their purpose


Fixed Income these days is an oxymoron.
I think it is safe to say that Fixed & Income were good friends, but Income just left town on the last stagecoach.
It is almost _High Noon_ now, the train's a'comin' and Fixed is left all alone....


----------



## ddkay

Oh I missed this story.

http://www.senate.gov/legislative/L...ote_cfm.cfm?congress=112&session=1&vote=00120

Senate rejected Boehner's plan at 8PM, like I expected... the vote for Reid's plan is at 1AM Sunday morning.


----------



## Abha

ddkay said:


> Oh I missed this story.
> 
> http://www.senate.gov/legislative/L...ote_cfm.cfm?congress=112&session=1&vote=00120
> 
> Senate rejected Boehner's plan at 8PM, like I expected... the vote for Reid's plan is at 1AM Sunday morning.


Of course it is. These ***-clowns are will go down in history as the worst of the worst.

Why not have a re-vote at 8:55am Monday morning just to spice it up


----------



## sensfan15

HaroldCrump said:


> Fixed Income these days is an oxymoron.
> I think it is safe to say that Fixed & Income were good friends, but Income just left town on the last stagecoach.
> It is almost _High Noon_ now, the train's a'comin' and Fixed is left all alone....


my td e-series cdn bond fund has been a solid rock in these markets


I am up 4% since I bought into it in February I am not complaining!


----------



## sensfan15

here is an interesting chart on seekingalpha.com that shows whoowns US debt and the amount of debt each president contributed to the $430000000 grand total

The name of the game is to spend money. The U.S is an economic champion on the world stage. Money isn't even real. It isn't tied to something with a finite amount that can be found on earth (i.e Gold).


----------



## Belguy

At the beginning of the year, investor A decides to invest in a fixed income investment paying 2.3 percent per annum.

Investor B, being none too bright, decides to get greedy and puts his money into a S&P/TSX Composite Index based ETF. As of the end of July, this index is DOWN 3.7 percent.

You can calculate the spread.

Investor A has a guaranteed product where he will never lose his principal, even on paper, and actually gain a bit as well, while investor B has invested in volatile equities and is currently down 3.7 percent on paper with no guarantee against further losses.

Who is looking like the more prudent investor so far this year at least?

For taking a larger risk, investor B is rewarded with a significant loss while investor A is relaxing by the pool with his margarita.


----------



## Homerhomer

Belguy said:


> At the beginning of the year, investor A decides to invest in a fixed income investment paying 2.3 percent per annum.
> 
> Investor B, being none to bright, decides to get greedy and puts his money into a S&P/TSX Composite Index based ETF. As of the end of July, this index is DOWN 3.7 percent.
> 
> You can calculate the spread.
> 
> Investor A has a guaranteed product where he will never lose his principal, even on paper, and actually gain a bit as well, while investor B has invested in volatile equities and is currently down 3.7 percent on paper with no guarantee against further losses.
> 
> Who is looking like the more prudent investor so far this year at least?
> 
> 
> For taking a larger risk, investor B is rewarded with a significant loss while investor A is relaxing by the pool with his margarita.


That's why for anyone with a short term horizon of 7 months it's not advisable to put money into equities and keep cash. It's been a know fact for decades.


----------



## Causalien

5 years later. The fixed income was exposed as AGNC bond. As interest rate increases, the investor lost all principles.


----------



## fatcat

> Investor A has a guaranteed product where he will never lose his principal, even on paper, and actually gain a bit as well, while investor B has invested in volatile equities and is currently down 3.7 percent on paper with no guarantee against further losses.
> 
> Who is looking like the more prudent investor so far this year at least?
> 
> For taking a larger risk, investor B is rewarded with a significant loss while investor A is relaxing by the pool with his margarita.


 great point ... a simple gic ladder is the perfect way to go ... if things don't start to settle down (fat chance) i might be going there myself  ... it's all about sleeping well at night

its worth noting that people have been putting money into short term government securities at negative interest rates, just to be sure they don't lose it all !

the us government 10 year yield actually dropped yesterday ..

however bad it is in the usa, it is seen as the best of a set of bad options

there is simply nowhere else to go

which is why this thing will get patched up (in the short term)


----------



## Belguy

Actually, U.S. investors have been staying away from short term government bonds and going out ten or even twenty years figuring that at least those longer term bonds will be less apt to result in a default.

http://www.buystockpicks.net/real-t...-investors-rattled-by-debt-ceiling-stalemate/


----------



## Abha

That is far too simplistic an example and like the other poster mentioned, your time frame is far too small. 

I've got a huge risk tolerance and am willing to absorb the losses in the hopes of realizing significant gains. 

I know everyone has their own arguments but I think equities are the way to go long term.

Can't stomach the risk. Then stick to cash, GIC's and Short Term Bonds


----------



## ddkay

Here's the House vote tally on Reid's bill, it was also defeated 246-173 http://clerk.house.gov/evs/2011/roll682.xml

Not a single Republican member voted in favour.

Senate vote is still at 1 AM.


----------



## ddkay

Republicans put out this video to criticise Obama for "not having a plan" http://www.youtube.com/watch?v=Jttmyllmq3U (Democrats did have a plan, it was the one proposed by Senator Reid)

Then on the other side Democrats made this website to criticise Repulicans for obstructing progress to compromise: http://democrats.senate.gov/defaultclock/

Some people think Obama can use the 14th amendment to do whatever he wants if there's no bipartisan solution by August 2, but that would invoke a constitutional crisis and a guaranteed downgrade


----------



## Belguy

In today's comic strip, Dilbert is getting ready for "a complete meltdown of the financial system".

While he has been stockpiling a few months' worth of supplies, he is getting criticism for not bringing in enough defensive weaponry. 

Sorta funny if it wasn't so scary!!

Both the House and the Senate are getting more dug in to their respective positions which doesn't bode well for any last minute compromise. Neither side give a tinker's darn about anything other than their own selfish positions. Instead, they seem prepared to take it to the brink and maybe right over the edge!!


----------



## ddkay

Following is a summary of where the two sides agree, based on their latest proposals, and where sticking points remain. 

AGREEMENT 
* Any debt-ceiling hike must be paired with spending cuts to keep the national debt from growing out of control. 
* Both the plan drafted by House Speaker John Boehner and the plan offered by Senate Democratic Leader Harry Reid would trim annual discretionary spending, which funds everything from river dredging to national defense, by about $750 billion over 10 years. 
* Both plans envision those spending cuts being phased in gradually, to avoid harming the shaky economy. The Boehner plan would cut spending by only $6 billion in the fiscal year that starts Oct. 1; the Reid plan calls for a cut of $4 billion from the current level of $1.049 trillion. 
* Both plans call for a special committee, made up of an equal number of Republicans and Democrats from the House and Senate, to find further savings. These could come from benefit programs and an overhaul of the tax code. 
* The committee's recommended cuts would get a vote in both the House and the Senate free of the usual procedural hurdles. 

DISAGREEMENT 
* Democrats want to ensure that the discretionary spending cuts would affect the Pentagon and other security programs, not just domestic programs. Republicans do not like this idea. 
* The two sides remain divided about how to ensure that Congress will actually sign off on further spending cuts. 
* Republicans have proposed a short-term debt limit increase of about $900 billion that would cover the country's borrowing needs until the end of 2011 or early 2012, enough time for the special committee to complete its work. At that point, Congress would not be able to raise the debt ceiling again unless it signs off on the committee's recommendations. 
* Democrats say that would create more economic uncertainty and put the country through another wrenching debt-limit debate. They want the bill to include a debt-ceiling hike of $2.4 trillion, enough to last past the 2012 elections. Reid's latest plan would allow President Barack Obama to raise the debt ceiling in stages and allow Republicans to register their disapproval. 
* Reid's plan does not reflect this, but the White House has proposed that various politically unpalatable policies kick in if Congress balks at further budget savings. 
* In talks with Boehner nearly two weeks ago, the White House proposed automatic income-tax increases on the wealthy and across-the-board cuts to the Medicare and Medicaid health programs to spur action. 
* Republicans said that the across-the-board health care cuts would hurt them politically as well. Instead, they proposed that two central elements of Obama's healthcare law -- the requirement that individuals purchase health insurance and an independent Medicare oversight board -- would be scuttled. 
* Talks between Boehner and Obama broke down a week ago over this issue and it is sure to loom large in this weekend's discussions. (Reporting by Andy Sullivan) (([email protected]; +1 202 898 8391; Reuters Messaging: [email protected]))


----------



## Jungle

They said on CNN that if the gov defaults, stock markets could crash 30%!!

So who's going to have the balls and do some buying if that's the case!!


----------



## ddkay

I can't find that Dilbert comic, can you post it?


----------



## ddkay

I don't understand why neither side is talking about closing tax loopholes. It shouldn't be about taxing the rich "more", it's about taxing them what they should pay to begin with.. then again, maybe that's what they mean by "overhaul of the tax code"?


----------



## andrewf

Everyone is against the loopholes they don't use. The problem is that all the big ones are used by too many people.


----------



## Abha

They can do whatever they want. There will always be loopholes as long as there are lobbyists and special interest groups....and they will be around as long as we have a capitalistic system in place.

Look at poor Elizabeth Warren. She gets thrown under the bus by Obama after years of hard work and dedication to protecting the middle and lower class citizens of the United States. 

Also, I'm willing to bet anyone $10,000 that the market will not drop by 30% All that is bullshit to scare the average person. 

If anyone is thinking of liquidating their positions of this point, go to Google News and read the articles between November 2008 and March of 2009. Don't let fear mongering destroy your wealth.


----------



## ddkay

In case anyone forgot it's the structural failure in banking, health care and tax code that's causing job loss and deficit


----------



## ddkay

The only reason banks were lobbying Friday is because they're afraid of a bank run


----------



## Belguy

That Dilbert strip is in the comic section of today's Toronto Star but I can't find it on their website. Maybe someone can find it on the web and post it for us.

After watching tonight's U.S. networks evening news broadcasts, I came away with the impression that all of the brinkmanship and grandstanding may be over and that we will have a compromise agreement sometime tomorrow before the Asian markets open again.

Well, we can hope!!!


----------



## ddkay

Oh no it was even worse, JP Morgan profits from being America's largest food stamps processor



> Mr. Dimon’s call to Mr. Geithner Friday was prompted by a growing concern in the last week that even a brief disruption in federal payments might force JPMorgan and other big banks to lay out billions of dollars to food-stamp recipients, military service members, and other beneficiaries of the government, unnerving both banks officials and customers.
> 
> In a statement, a Treasury spokeswoman, Colleen Murray, said “in the event Congress does not act to raise the debt ceiling, Treasury had assured the Federal Reserve that we will only authorize them to make government payments when there are sufficient funds to cover such payments.”


----------



## HaroldCrump

If the US "defaults" and/or gets a rating downgrade, it will be exclusively because they _choose_ to.
There is no reason whatsoever why they cannot have a compromise deal of some sort.

If on 4th Aug (or a little bit later) they do a selective default then I have to say there is a deeper reason to it.
Maybe it's an attempt to further devalue their currency.
Instead of doing a QE3 to devalue, for some inexplicable reason, they are consciously choosing to default.

One possibility could be that they might be trying to wriggle out of the clutches of the Chinese holding so much of their debt, without overtly appearing to do so.
Maybe they do, after all, want the Chinese to dump part of their USD holdings.
The ramifications of selective default are crazy, of course.

The other question is whether the top 3 ratings agencies have the guts to downgrade the US credit standing.
Esp. when the US govt. has initiated a "review" of their past record.
Moody's has been asked to testify before congress on their ratings record during the RE debt crisis.
Maybe this is a way for the US govt. to arm twist the ratings agencies.
It would be rather bad for the ratings agencies if the US govt. slaps them with millions in punitive fines for their incompetence in rating the RE debt.

Furthermore, it is well within the power of the US govt. to render the ratings agencies irrelevant, similar to what the US has done with the United Nations.
Their validity is a matter of question anyway.
What with the RE debt ratings debacle, followed so soon with the European sovereign rating errors, one must question whether these agencies are even worth listening to.


----------



## ddkay

I don't know about you, but the Junk status rating on Greek bonds makes me think twice about buying any... Right now U.S. law requires any entity selling bonds to use a ratings agency. Ratings agencies have their place in the financial system, they shouldn't be made irrelevant, but they should be made non-profit, regulated, audited and use up-to-date strict methodologies.

Also, right now its customary for ratings agencies to send fresh reports to governments like the US or Greece so they can pick over details or inaccuracies before it goes public. I think that's pretty fair.


----------



## HaroldCrump

ddkay said:


> I don't know about you, but the Junk status rating on Greek bonds


Fat lot of good that does - rating their bonds as junk after the country is essentially already bankrupt.
Where were the agencies 2 years ago?
Ditto during the RE debt crisis.
These jokers were rating garbage mortgage bonds as AAA+

The rating agencies are, like the cops in a Hollywood action movie, always the last to arrive on the scene.


----------



## ddkay

I think a downgrade from Aaa to Aa1 wouldn't be the disaster the media is making it out to be, there's no replacement reserve currency yet. The bond market is suggesting anything but higher interest rates, they're on their way to becoming negative.

Switzerland has a couple of hundred billion worth of issued debt and the high franc is destroying their business earnings (Credit Suisse just laid of 2000 workers), the US has 14 trillion in issued debt so when times are tough bond investors still crowd into the same relatively safest large pool.

US debt is the only sovereign debt you can be sure to get at least 95% of your money back in a negative yield environment. Greece, Portugal, Spain, Italy, they're all going to default someday no question about it, and that's going to end the Euro.

I know about the shadiness of ratings agencies in the past, but I think they're trying to clean up their image now.


----------



## Abha

ddkay said:


> I think a downgrade from Aaa to Aa1 wouldn't be the disaster the media is making it out to be, there's no replacement reserve currency yet. The bond market is suggesting anything but higher interest rates, they're on their way to becoming negative.
> 
> Switzerland has a couple of hundred billion worth of issued debt and the high franc is destroying their business earnings (Credit Suisse just laid of 2000 workers), the US has 14 trillion in issued debt so when times are tough bond investors still crowd into the same relatively safest large pool.
> 
> US debt is the only sovereign debt you can be sure to get at least 95% of your money back in a negative yield environment. Greece, Portugal, Spain, Italy, they're all going to default someday no question about it, and that's going to end the Euro.
> 
> I know about the shadiness of ratings agencies in the past, but I think they're trying to clean up their image now.


In case anyone was wondering, Canada holds *$87.7 billion* in U.S. debt. In comparison, Asian countries hold *$3 trillion* in U.S. debt and European countries hold *$1 trillion*.

Just to put things into perspective...


----------



## ddkay

Postponed again, 12 hours to Sunday at 1pm. However, they seem more confident it will go through.


> Senate Majority Leader Harry Reid announced late Saturday the first glint of hope in the debt-ceiling saga, delaying a scheduled 1:01 a.m. Sunday cloture vote to give congressional and administration negotiators more time to reach a compromise.
> Reid moved the vote to 1 p.m. Sunday and did so with no Republican objections -- a sign the GOP shared Reid's new-found optimism about a potential breakthrough. Moving the vote without objection marked the first unified parliamentary move in a day fraught with just that.
> "I'm optimistic there will be no short-term arrangement whatsoever," Reid said on the floor of the Senate around 10 p.m. Saturday night. "I'm also confident that reasonable people from both parties should be able to reach an agreement . I believe we should give them time to do so."
> Negotiators told National Journal that progress was made on the toughest remaining issue -- a so-called trigger to ensure that spending cuts of up to $2.4 trillion would, in fact, be instituted by a special committee the debt-ceiling bills in Congress would establish.
> Reid said it was necessary to delay the scheduled early-morning vote to give negotiators more time. Congressional sources said there were slender hopes that a deal could be struck before Asian stock markets open starting at 5 p.m. EDT.
> Following the movement of the vote to later Sunday, Reid adjourned the Senate.


----------



## andrewf

Is that just what the Bank of Canada has in its FX reserves? I would think Canada holds a lot more privately.


----------



## Abha

andrewf said:


> Is that just what the Bank of Canada has in its FX reserves? I would think Canada holds a lot more privately.


There might be a bigger holding through the financial institutions but I did read that if the U.S. were to default it would amount to a 0.1 cent loss per share for Manulife so I can't imagine it being too bad.

Manulife is probably the biggest player tied to the equity markets but again you'd have to do your own due diligence.

I've been plowing money into Goldman Sachs and FAS (3x Financial Bull) last week so I'm hoping (and praying) for a big time head fake rally, where I will unload and then promptly start shorting the banks. 

My theory is still the same as before. We pass the vote, mini rally followed by a 1-2% sell off on the news.


----------



## andrewf

I bought VXX puts/XIV when the VIX spiked. At close the puts were up about 5%. We'll see whether they get their act together. I don't think they'll be stupid enough to default.


----------



## sags

In all the talk and worry over the debt ceiling, some pretty dismal numbers have been largely ignored by the main stream media.

If people are looking for indicators of future stock market direction, they might want to look here.

http://www.cnbc.com/id/43946813


----------



## ddkay




----------



## Homerhomer

sags said:


> In all the talk and worry over the debt ceiling, some pretty dismal numbers have been largely ignored by the main stream media.
> 
> If people are looking for indicators of future stock market direction, they might want to look here.
> 
> http://www.cnbc.com/id/43946813


Absolutely, other companies with planned layoffs are Sears and Abbot (just of the top of my head), couple that with what CAT and UPS had to say and possible upcoming government layoffs, it all should give one enough reasons to hold on to some cash.


----------



## ddkay

Just 1.5 hours left till the vote! Nobody knows yet what the other $2.4 trillion in cuts will be.. just that they may or may not be heavily focused on defense cuts (unpopular with republicans) or medicare (unpopular with democrats) or even across the board... Meanwhile Japan thinks everyone is too optimistic about another small bandaid solution.



> (Reuters) - Japan is increasingly alarmed that the United States may miss the August 2 deadline for raising its debt ceiling and Tokyo fears markets may be too optimistic about prospects of a lasting solution to the crisis, sources familiar with Japan's international and monetary affairs said.
> 
> Officials still hope Washington can manage to strike a last-minute deal and even if that proves impossible, will give priority to interest payments to international holders of U.S. Treasury debt to limit the immediate market impact, the sources said.
> 
> But Tokyo's concern is that if the crisis drags on without clear and sustainable resolution, markets may be thrown into turmoil, just like it happened when Lehman Brothers collapsed in September 2008.
> 
> "There is nothing really concrete that supports the still predominant view that the U.S. will somehow clinch a deal in time and avoid default," said one of the sources.
> 
> "If there is a default, the impact on global markets will be huge."
> 
> Another source confirmed this view. "Nobody thought Washington would let Lehman collapse. But look what happened," the official, who declined to be named because of the sensitivity of the matter, said Sunday.
> 
> Japan ranks only behind China on the list of United States' biggest international creditors. If markets go wild over a threat of U.S. debt default, Japan's first defense will be to ensure that Japanese financial institutions have sufficient supply of dollars, the sources indicated.
> 
> The Bank of Japan believes Japanese commercial banks have sufficient dollar cushion but will use its dollar swap arrangement with other central banks to prevent a dollar squeeze in case of market turmoil.
> 
> It is also prepared to flood markets with cash through its market operations in case inter-bank borrowing costs spike, BOJ officials say.
> 
> Another source of concern is the yen's ascent near a record high of 76.25 to the dollar hit days after the March quake.
> 
> Japanese monetary authorities are prepared to step into the currency market to stem yen rises if they see the moves as driven by speculators and damaging enough to the economy.
> 
> The BOJ may also consider easing monetary policy at its two-day rate review that ends Friday, or even earlier, if the yen continues to spike enough to hurt business sentiment and derail a fragile economic recovery.


----------



## Argonaut

I'm hoping for a drop on Monday. To be honest, the Dow has no business being up 5% year to date.


----------



## Belguy

The TSX will be sitting out on tomorrow's action due to a not-so-well deserved vacation.


----------



## ddkay

Vote time! http://www.c-span.org/flvPop.aspx?src=cspan


----------



## Argonaut

ddkay said:


> Vote time! http://www.c-span.org/flvPop.aspx?src=cspan


According to that video, the Reid bill failed to pass the Senate. I don't know what version of the bill the prompt means or whatever. But the funny thing is that it says Reid voted against his own bill. Of all the crooks in Congress, Harry Reid has got to be the biggest.


----------



## gibor365

McConnell Says Debt-Ceiling Accord ’Very Close’

http://www.bloomberg.com/news/2011-...reach-tentative-deal-on-u-s-debt-ceiling.html


----------



## ddkay

Now this bomb... If so many Americans opposed raising the debt ceiling from they get-go why didn't politicians begin working on balanced budget at the beginning of this year. It's just dragged on and on without any real thought. Here comes the possible 14th amendment and constitutional crisis.


> (Reuters) - The U.S. public overwhelmingly opposes raising the country's debt limit even though failure to do so could hurt America's international standing and push up borrowing costs, according to a Reuters/Ipsos poll released on Wednesday.
> 
> Some 71 percent of those surveyed oppose increasing the borrowing authority, the focus of a brewing political battle over federal spending. Only 18 percent support an increase


----------



## Abha

ddkay said:


> Now this bomb... If so many Americans opposed raising the debt ceiling from they get-go why didn't politicians begin working on balanced budget at the beginning of this year. It's just dragged on and on without any real thought. Here comes the possible 14th amendment and constitutional crisis.


I can't imagine Americans to be that stupid. We should all move down there and teach them Economics 101


----------



## ddkay

House adjourned.. new vote Monday


----------



## ddkay

Having Q1 growth revised down to 0.4% doesn't help these politician's case


----------



## Argonaut

Abha said:


> I can't imagine Americans to be that stupid. We should all move down there and teach them Economics 101


So Economics 101 teaches that the solution to an unpayable debt is to create more debt? Sounds like the average customer that I see at the bank.


----------



## sags

Polls show Americans are opposed to raising the debt limit.

Polls show Americans don't want any cuts to social security or medicare.

Polls show Americans don't want to raise taxes.

From the polls, we can assume they don't know what they want.


----------



## humble_pie

the web emmy awards live at roy thomson hall.

presented by 2 emerging canadian female celebrities.

kate middleton the duchess in hot pants & jimmy choo stilettos:

_" and the 2011 WEMMY award for best running commentary on a national crisis goes to ...."_

(sound byte ... envelope tearing open)

alyssa reid in fringed buckskin & thi-hi boots:

_" Dee Dee Kay for CMF Forum !!"_


----------



## humble_pie

sorry i got a little carried away.

but i am fed up with seeing this idiot headline day after day after day after day.

isn't anybody else sick to death of seeing such a yellow, custardy, cowardly, dastardly, chickenpoop headline whine.

ooh ooh mommy i'm so scared help help mommy could we be heading to another yo !! haaaaallllp !! momma mia !! market crash.


----------



## Jungle

Everybody has their own tolerance with risk, once it reaches past that uncertainly level, YES, people do get scared. 

Doesn't help when CNN says the market will crash 30%. I'm sure it does help keep people glued to the TV so they can watch more advertising.

Maybe this will brainwash people spend more money and stimulate the economy.


----------



## Abha

Futures are ripping higher. 

It's going to be a good Monday (Still praying though...never know with those crazy tea party folks)


----------



## andrewf

Argonaut said:


> So Economics 101 teaches that the solution to an unpayable debt is to create more debt? Sounds like the average customer that I see at the bank.


There is nothing unpayable about the US debt. They can print as many dollars as they need to repay their debt. The have a borrowing problem, but the answer to that is not to default on their debt. To do so would be positively insane.


----------



## Belguy

I'm scared...Could we be headed for another market crash?


----------



## Abha

Belguy said:


> I'm scared...Could we be headed for another market crash?


LOL! I'm curious as to when you don't feel nervous? What did you do before you retired? You don't have to answer if you don't want to.


----------



## Belguy

I was a Great White Shark hunter!!

I also hunted for snakes and crocs and made a decent living at it before I came back here to retire.

Since retiring, I have been trying my hand at storm chasing.

I also like to travel around the country to try out some of the newest rollercoasters.

However, the stock market is much more scary!!!


----------



## ddkay

yo humble I know this thread title is killing you and Ima let you finish but I just wanted to say there's bits of entertainment to enjoy if you loosen up 

For example, Chairman of the Congressional Black Caucus just described the new debt deal as "a sugar-coated Satan sandwich"


----------



## gibor365

_U.S. stock-index futures surged, indicating the Standard & Poor’s 500 Index may rebound from its worst weekly loss in a year, amid optimism lawmakers will reach an agreement in time to avert a default on Aug. 2, when the Treasury Department has said it will run out of cash to pay bills.

S&P 500 futures expiring in September rallied 1 percent to 1,304 at 7:01 a.m. in Tokyo. Dow Jones Industrial Average futures climbed 145 points, or 1.2 percent, to 12,223. The U.S. dollar strengthened 0.7 percent against the yen and 1.1 percent versus the Swiss franc. IntercontinentalExchange Inc.’s Dollar Index, which measures the currency against six U.S. trading partners, fell in each of the past three weeks. _


----------



## Abha

This is what I feel like watching the future markets right now.

http://www.youtube.com/watch?v=ZsrPKtx0qyg


----------



## humble_pie

ddkay i thought your commentaries on the US debt predicament were the best i've seen bar none, outshining all the major media. It got so i'd look here instead of the ny times.

but i did regret that you were posting quality op-ed journalism under a ninny headline.

i put a recipe suggestion for sugar-coated satan sandwiches in the coffee lounge, maybe by lunchtime tomorrow there'll be several shady variations.


----------



## Causalien

Now that the political opera has ended. I can go back to hibernation for a while and continue my vacation from the market. Until the next crisis in a month where they will justify QE3 people!


----------



## Belguy

It ain't over 'till it's over and both houses still have to vote on this deal. I think that it is fairly safe to say that it will pass in the Senate but what could happen in the House is still of concern. Certainly, most of the Tea Party members on the right and some liberal democrats on the left may find ample reason to turn it down. Also, if spending is cut, that may lead to a higher unemployment rate down the road and more trouble for the economy and, by extension, for stocks. Approval will get us over the immediate hump but will, by no means, in and of itself, necessarily lead to an improving economy--in fact, possibly quite the opposite. This could add another percentage to the U.S. unemployment rate once the cuts start taking effect. I'm not saying that approval of a deal is a bad thing in the short term but I would save much of the euphoria for a later time.

Even a short term bounce in the markets may not be sustainable over the next days, weeks, and months once sober second thoughts take hold.

In other words, the States and Europe are still in one heck of a mess economically speaking and this agreement won't change that even if it is approved.


----------



## daddybigbucks

Abha said:


> I've been plowing money into Goldman Sachs and FAS (3x Financial Bull) last week so I'm hoping (and praying) for a big time head fake rally, where I will unload and then promptly start shorting the banks.
> 
> My theory is still the same as before. We pass the vote, mini rally followed by a 1-2% sell off on the news.


looks like your theory may hash out. Asian markets are both up 2% so far.


----------



## ddkay

Cool Bloomberg Government tool, pick and choose what needs to be cut if they default and have to priortise payments

http://about.bgov.com/2011/07/12/august-invoices-show-u-s-treasury’s-limited-choices/

Found it in this useful Debt Ceiling Analysis report. In addition to prioritization info it also breaks down the schedule for August 2011 debt maturities and shows the daily inflows available to pay for it (providing everything goes smoothly).


----------



## ddkay

I've been reading a couple of research papers and almost all historical data suggest that, in the short-term, austerity based fiscal consolidation (government shocks) reduce aggregate demand and drags down GDP growth. There are a few rare cases where this didn't happen, namely Denmark and Ireland, and Finland and Sweden after the USSR collapsed in 1991. There are so many variables that effect the outcome, though. The U.S. is uniquely positioned, the debt limit and holding reserve currency status puts restraints on the effectiveness of their central banks policy decisions.

In summary:
- Tax increases and reduced government spending may or may not correlate with positive GDP
- Tax increases and increased government spending may or may not correlate with positive GDP
- Tax increases and same levels of government spending may or may not correlate to positive GDP
- Tax cuts and reduced government spending may or may not correlate to positive GDP (Today's decision)
- Tax cuts and increased government spending may or may not correlate to positive GDP
- Tax cuts and same levels of government spending may or may not correlate to positive GDP
- Tax freeze and reduced government spending may or may not correlate to positive GDP
- Tax freeze and increased government spending may or may not correlate to positive GDP
- Tax freeze and same levels of government spending may or may not correlate to positive GDP

There is no absolute perfect solution, the outcomes depend which statistical model you use (e.g. DSGE, Granger cause, RBC, VAR) and analysis might not count non-policy actions...

It really is a complicated system and has so many hidden and unaccounted risks. I hope some smart person figures out how to put humpty dumpty back together again.

MoneyGal made a great post in another thread that mentioned the Permanent Income Hypothesis, consumption patterns are determined by long term income expectations rather than current income. There is too much uncertainty now, consumer sentiment is low and generally people are not pleased with the outcome of the recovery. So domestic demand is subdued, foreign demand is also subdued. In the last few years I notice the private sector taking advantage of low interest rates to do leveraged buyouts and mergers & acquisitions. Now one area of the economy greatly benefit from this - the stock market. Stock market growth is good for the economy because it increases private sector spending, capital gains and cyclically-adjusted government revenue. However, M&A has eliminated thousands of jobs, reduced wages and market competition, so I don't know what the net benefit is there. There must be a lot value lost in the economy due to the reduced multiplier effect. Also because of international trade policies and tax evasion it seems difficult to quantify the benefits of increased private sector wealth to conglomerates in a single economy...


----------



## ddkay

I got it - if the US government registers as a charity all the billionaires like Gates and Buffet and Larry Ellison can leave a portion of their wealth to pay off the debt (with tax benefit). They will support needy American families, education, urban development, environmental protection, health care, disease and control prevention, etc.


----------



## humble_pie

the Eisenbergs aren't waiting for Gates & Buffett.

http://money.cnn.com/video/news/2011/07/29/n_ny_debt_couple.cnnmoney/


----------



## Argonaut

The market is selling off hard now after opening higher. Crazy stuff.


----------



## Abha

Vote Theatrics Compromise - Check

Mini Rally - Check (2.2%)

Sell off on the news - Check


----------



## ddkay

That rally could have been shorts covering from last week... and now the markets are in freefall because of a the bad ISM report "ISM employment index down sharply to 53.5 from 59.9"

SPX market makers at CBOE are saying it could accelerate from here, but it's sitting on the 200 DMA


----------



## Abha

It's only an hour into the open guys. Don't get discouraged just yet


----------



## ddkay

Meh.. the deal they made is effectively useless. More deficit, cuts of $1 trillion on *future* spending (no specification), a subcomittee to discover $1.5 cuts trillion in *future* spending, no tax increases/tax code reform, and a depreciating dollar. They have essentially been arguing about an agreement to reach an agreement - kicking the can until a new government is in power. Chances are they'll get downgraded and this bull market is over. I'll stick to my negative outlook.


----------



## Yudansha

Too late, just got raped by selling VXX an hour too early.


----------



## Homerhomer

Manufacturing index pretty much confirms how bad things are, HSBC cutting 30,000 jobs worldwide, I bet most of them in developed countries, the "deal" is not worth the paper it is printed on.

I am beginning to think the issue of unemployment in US will be solved only when cost labour in US becames similar to Asia, and that is few decades away.

Cash is king ;-)


----------



## Abha

I don't think the ISM report is as bad as everyone says it is. 

It's weak but not anywhere near the tragedy everyone is making it out to be.


----------



## ddkay

It's the weakest since July '09 and only 4% of readings have been this low since 1955

WHAT RESPONDENTS ARE SAYING ...

"Inflation pressures have finally slowed down." (Chemical Products)
"With products sold internationally, the business conditions we are currently experiencing are declining from abnormally [high] record-breaking levels. Business conditions are currently flattening to more normal volumes, while trending slightly downward." (Machinery)
"Market conditions — Europe weak, U.S. soft, Asia strong." (Computer & Electronic Products)
"Demand from automotive manufacturers continues to improve." (Fabricated Metal Products)
"Export sales very strong, while domestic sales are sluggish." (Paper Products)
"The looming debt ceiling has government agencies backing away from spending. Forecasting a slowdown in demand in the short term." (Transportation Equipment)
"Generally seeing a slowdown, which is typical this time of year. Hopeful that this is seasonal only." (Plastics & Rubber Products)
"Most industrial customers seem to be sustaining their business. Export orders continue to remain strong. Price pressures persist, especially with commodity materials." (Chemical Products)


----------



## Abha

Sure it's disappointing but I'm not ready to buy the doom and gloom just yet.


----------



## Belguy

I was hoping to gain back some of the 4 per cent in change that I lost last week and not actually add to that loss this week!!


----------



## ddkay

Word on the street is the new safe haven is away from sovereign debt and into AAA rated blue chip corporate debt


----------



## Argonaut

ddkay said:


> Word on the street is the new safe haven is away from sovereign debt and into AAA rated blue chip corporate debt


Aren't the dividend yields on aristocrats higher than most of their debt? Plus they grow every year, and are more beneficial tax wise. I know equities have risk, and bonds are a different game and all that, but still.


----------



## fatcat

> Quote:
> Originally Posted by ddkay
> Word on the street is the new safe haven is away from sovereign debt and into AAA rated blue chip corporate debt
> Aren't the dividend yields on aristocrats higher than most of their debt? Plus they grow every year, and are more beneficial tax wise. I know equities have risk, and bonds are a different game and all that, but still.


 you need to ask yourself "what are the chances of _abc widgets_ going out of business ? " ... in which case, even if you are a bond holder, though you will come ahead of equities, it still isn't going to be a very happy day

i don't buy individual stocks, i just bough DIA which is the dow and has a p/e of like 12 .. i don't see too many scenarios where any of the companies in the dow 30 are going to go under anytime soon so i would say equities (via an etf for me) are the way to go

the stocks in DIA:

3M Co
ALCOA INC
AMERICAN EXPRESS COMPANY
AT&T, INC.
BANK OF AMERICA CORP
BOEING COMPANY
CATERPILLAR INC
CHEVRON CORPORATION
CISCO SYSTEMS INC
COCA COLA COMPANY
DU PONT (E.I.) DE NEMOURS
EXXON MOBIL CORP
GENERAL ELECTRIC CO
HEWLETT-PACKARD CO
HOME DEPOT INC
INTEL CORP
INTL BUSINESS MACHINES CORP
JOHNSON & JOHNSON
JP MORGAN CHASE & CO.
KRAFT FOODS INC-A
MCDONALD'S CORPORATION
MERCK & COMPANY, INC.
MICROSOFT CORPORATION
PFIZER INC
PROCTER & GAMBLE COMPANY
TRAVELERS
UNITED TECHNOLOGIES CORP
VERIZON COMMUNICATIONS
WAL-MART STORES INC
WALT DISNEY COMPANY

we are about the enter the age of the corporations ... nation states are on their way out


----------



## ddkay

usually the yield on corporate loans and bond issues is higher than stock equity dividends, but it shouldn't while there's a surge in demand


















either way, afaik companies will finance through loans or bond issues rather than stock equity because stock equity doesn't have any protection against losses. If a borrower fails to repay a lender on a loan or bond issue the courts force them to liquidate hard assets


----------



## ddkay

I kind of agree people should be taking stock equity, that way as a voting shareholder they can participate in the direction of the company and be rewarded for growth or punished for loss. Debt financiers make money whether or not a company is successful and are exposed to pretty little risk (except for the long term maturities) which I don't think is fair. If the U.S. Treasury issued stock equity to every citizen of the country the voting system and political bs might not suck as much.


----------



## ddkay

_Posted by John McDermott on Aug 01 20:39.

Barring a Republican rebellion in the House of Representatives, the Budget Control Act of 2011 will be passed by both houses of Congress on Monday, and sent to the President for his signature.

*Winners*

1. Brinkmanship. We’re beginning with an abstract noun because no politician deserves to be described as a winner. It’s pointless to judge who had a good or a bad war if that war was a bloody stalemate. But these negotiations — like those over the government shutdown — showed that those willing to raise the spectre of serious economic damage, and display a seething wackiness, can gain the upper hand over an emollient President.

2. Bondholders. Although it was never formally confirmed, leaked reports last week showed that payments to bondholders would be prioritised if the debt limit was breached. Meanwhile, 10-year US Treasuries barely flinched, remaining at or below 3 per cent for the entirety of the impasse.

3. Municipalities. Here us out. As Ezra Klein notes, the common assumption was that medicaid, which accounts for 22 per cent of states’ budgets, was going to be sacrificed to preserve existing medicare entitlements. But it, as well as social security, is to be exempted from the debt trigger. Medicare is now in the firing line, though the Congressional Budget Office’s analysis of the Act says that cuts brought on by the trigger would be limited to 2 per cent.

4. Fundamentals. For all the hubbub and palaver, corporate earnings, payrolls, PMI readings and GDP figures did more to move equity, bond and commodities markets in the last three months than Washington bloviations. Duh! you may exclaim, but it’s a win worth mentioning nonetheless.

5. Congress. Not in the eyes of the people, we stress to add. But with the introduction of “debt triggers“, the legislative branch has strengthened its hold over the executive branch. The White House wanted a “clean” deal — a ceiling lift not linked to cuts. But The Act breaks the $2,000bn+ debt ceiling lift into three parts: clean ($400bn now), dirty ($500bn only after Congress gets to pass a resolution of disapproval!) and filthy ($1,200bn or $1,500bn, depending on the outcome of the joint committee).

6. Millionaires. At least until the end of 2012. The Bush tax cuts are effectively outwith the bounds of the third (“filthy”) debt ceiling lift. This is because the rules of the joint committee, which is being set up to decide how to save a further $1,200bn, are written to take advantage of CBO scoring conventions. The repeal of a tax already factored in to the CBO’s baseline forecast would not count as new deficit reduction measures.

7. Defence stocks. The deal calls for $350bn in cuts from the base Defence budget over the next 10 years, limits “security” spending in fiscal years 2012 and 2013, and puts $500bn of defence spending at stake should the joint committee proposal fail. According to Citi analyst Jason Gursky, worse was priced in. Lockheed Martin, Northrop Grumman, and L-3 Communications were all down over 2.5 per cent at pixel time. It’s a bad day all round, of course, but if better was priced in, surely they’d have fallen by less?

8. The UK. Its economy is flatlining and public sector cuts are yet to really bite. And it would hardly be helped by a slowdown in growth in other rich countries. But compared to the bunfights taking place to its east and west, the UK’s relatively clinical approach to deficit reduction (due mainly to its parliamentary system) looks painless. Checks and balances have their limits.

9. Swiss Franc. The US dollar has been battered by the combination of debt ceiling uncertainty and — more importantly — suffering fundamentals. This is the frothy crest of a secular wave but risk-off currencies such as the Canadian dollar and the Swiss franc have risen over the period. The search for an alternative to the USAAA may well continue now that US political risk is finally being assimilated into market opinion.

10. Cliches. Debtmageddon! Debtocalypse! Countdown clocks! This West Wing video. Few observers — including this blog –have managed to avoid them. As William Safire famously observed: “”Last, but not least, avoid cliches like the plague.

*Losers*

1. The budgetary process. The debt ceiling is an anachronism that should be abolished but it has now supplanted the traditional process of budgets and continuing resolutions. We’ve discussed our opposition to the debt ceiling and our nascent love of Chilean fiscal rules in this inherently thrilling post. In short: policy decisions shouldn’t be divorced from the decision to pay for them. Debt ceiling rows have flared up before, but 2012 seems to set a dangerous precedent. Roll on 2013!

2. The unemployed. The White House tried to include the extension of “emergency” federal unemployment insurance in a grand bargain with House speaker John Boehner. It didn’t form part of the final deal, and now looks likely to expire at the end of 2011. With the US still very much facing an “emergency” employment situation, this will make life harder for job seekers and reduce private consumption.

3. Graduate students. Title V of the Budget Control Act details reductions to federal student loan grants, subsidised loans for graduate students, and financial incentives to pay loans early.

4. Stimulus supporters. No real surprise here, but it’s all eyes back on Ben Bernanke, should the US economy slip further in the second half of 2011. The New York Times’s Nate Silver is right that there is some good news for stimulus advocates: all but $20bn of spending cuts are backdated beyond fiscal year 2012. Using conventional macroeconomic models that’ll mean small fiscal drag (Citi estimates 0.1 – 0.2 per cent). But with no payroll tax cut extension included in the deal, that will be scant comfort. Indeed, Paul Krugman is angry.

5. The Bowles-Simpson plan. The National Commission on Fiscal Responsibility and Reform was ostensibly established to provide a bipartisan way to return to the US to sound fiscal footing. It had its faults but it’s still probably the best moderate plan out there. Now, there’s a new Joint Committee in town. But it’s a much smaller entity, both in size (it will identify $1,200bn of savings compared to Bowles-Simpson’s $4,000bn) and in scope (revenue increases are half off the table).

6. A stable debt:GDP ratio. After all the fuss, little has been done to reduce the US’s structural deficit, at a time when GDP estimates receiving widespread downward revisions. BarCap estimate that the deal is only about half the size required to stabilise the debt:GDP ratio at 75-80 per cent within 10 years. And that’s with current, rosy growth assumptions. Willem Buiter is even more pessimistic.

7. Standard & Poor’s. This might be a little harsh. According to Vincent and Carmen Reinhart, the credit rating agency would be justified in downgrading the US to AA. But it has put itself in a bit of a bind. In addition to placing the US on CreditWatch negative (i.e. there’s a greater than one in two chance of a downgrade within 90 days) it strongly hinted that $4,000bn of savings over 10 years was the magic number. The deal offers no more than $2,400bn. Follow through, and S&P risks a political backlash. Back down, and it risks looking weak.

8. Presidents Kennedy through George W. Bush. All their hard work increasing non-discretionary spending has been rolled back. According to the White House statement on the debt debt, “discretionary caps will put us on track to reduce non-defense discretionary spending to its lowest level since Dwight Eisenhower was President.”

9. Winning the future. The cousin of loser number 8. The cuts to discretionary spending required of the Joint Committee are to parts of the US budget that the President hoped would fund his 2011 State of the Union vision. A lot of education and infrastructure funding is local. As ever, though, the Onion made the point better (and more controversially) than anyone else: “Al-Qaeda Claims U.S. Mass Transportation Infrastructure Must Drastically Improve Before Any Terrorist Attacks.”

10. Platinum coin makers. FT Alphaville was looking forward to having our picture taken next to Tim Geithner’s newly minted $1,000bn coin at the US Mint. Alas, we’ll have to wait until at least 2013._


----------



## larry81

*House Passes Bill on Debt Ceiling*
http://www.nytimes.com/2011/08/02/us/politics/02fiscal.html?_r=1


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## Belguy

Thanks, ddkay--I enjoyed your latest posting!!

Now that we've kicked that can further down the road again, we can get back to analyzing the fundamentals to determine which way our investment accounts will be heading next.

One thing for sure, I don't think that it will be straight up!!!


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## KaeJS

lol.

As if _that_ was a big surprise.

motherF politicians.


----------



## Abha

This may be a little profane/crude for some of you but I had a good laugh.

http://www.youtube.com/watch?v=jllJ-HeErjU&feature=player_embedded


----------



## KaeJS

^ Seen that before, Abha.

Hilarious. I watch it every now and then. I have it saved under my favourites. lol


----------



## daddybigbucks

KaeJS said:


> lol.
> 
> As if _that_ was a big surprise.
> 
> motherF politicians.


Scary part is that this is sounds more and more like Karl Marx's prediction that Capitalism will keep on pushing upward and onward at all costs. To a point where a meltdown will occur, that Capitalism cannot recover from.

I bet if politicians were a bunch of 20 year olds, they would hold the debt limit and default and then take the pain and start anew because they know they have time to rebuild and become stronger than before. But instead we have a bunch of 65 yr old semi retired politicians who wouldnt even think about chancing THEIR net worth cutting in half even though it would benefit 99.9% of Americans.

Maybe im too cynical but thats the way i see it.


----------



## KaeJS

The Americans have a spending problem. The 65 year old semi-retired politicians spend like 20 year olds. That's the real issue.

And if the politicians were 20 years old and decided to let the country default, you'd have a very pissed off Belguy.


----------



## andrewf

Argonaut said:


> Aren't the dividend yields on aristocrats higher than most of their debt? Plus they grow every year, and are more beneficial tax wise. I know equities have risk, and bonds are a different game and all that, but still.


For American corps, dividends are not better tax-wise than interest. Only Canadian dividends are tax preferred.


----------



## HaroldCrump

daddybigbucks said:


> Scary part is that this is sounds more and more like Karl Marx's prediction that Capitalism will keep on pushing upward and onward at all costs. To a point where a meltdown will occur, that Capitalism cannot recover from.


To be technically correct, what he said is that capitalism will lurch from one crisis to another - neither completely collapsing nor slowly phasing out (unlike feudalism).
Therefore it will be up to the proletariat to strike it down and replace it with communism.
Lenin further clarified it by saying that capitalism is like a crumbling wall (or was it rotting - not sure of the exact Russian translation) that never quite falls on its own, but needs only one strong push.


----------



## Abha

HaroldCrump said:


> To be technically correct, what he said is that capitalism will lurch from one crisis to another - neither completely collapsing nor slowly phasing out (unlike feudalism).
> Therefore it will be up to the proletariat to strike it down and replace it with communism.
> Lenin further clarified it by saying that capitalism is like a crumbling wall (or was it rotting - not sure of the exact Russian translation) that never quite falls on its own, but needs only one strong push.


Brings me back to first year law in University. 

In any case, anyone who can read a chart can see that we are in a trading range right now. The Bears haven't had too much luck knocking the market down and I still am banking on the notion that we go higher from here. 

In any case I switch from perma-bull to a poor mans David Rosenberg pretty quickly so I'm not attached to either camp.


----------



## osc

If US would stop policing the world, they would not have any financial problem. Look at what happened to the Soviet Empire a few decades ago - brought down by military over-spending and, funny thing, a war in Afghanistan.


----------



## webber22

Similar to what I posted last Friday, Goldman/S continues to sell heavily on the TSX from the level 2 quotes I saw. Maybe they were privy to some of these miserable reports now surfacing ...


----------



## Argonaut

The dentist was right all along. 

The S&P 500 is now below the 200 day moving average. The TSX formed a death cross last month. I'm no technical expert but that is all mega-bearish. All the fundamentals of the economy are horrible. There is absolutely no catalyst to drive the markets higher. With the new bill there will be no more stimulus, and a ratings downgrade is possible. The game is over.

There are ways to protect oneself. Puts in the S&P 500 looks to be easy money. The king of all investments, the most precious of all metals beckons: gold. Gold is an absolute MUST in every portfolio. At least 25%.


----------



## ddkay

This Jon Stewart clip on the crappy deal is hilarious, specifically the question pitched from the White House audience member last December: http://gawker.com/5826797/


----------



## andrewf

QE3 is the only obvious thing that might cause the market to move higher. I think it is reasonably likely, with GDP estimates being revised downwards.


----------



## Homerhomer

The one quirck which makes things more complicated is that Bernanke only knows how to print money, without possibility of QE3 there wouldn't be anything on the horizon to keep the market from plunging.


----------



## Argonaut

Is there a timeline as to when Bernanke speaks, so I can adjust positions accordingly?


----------



## Homerhomer

Argonaut said:


> Is there a timeline as to when Bernanke speaks, so I can adjust positions accordingly?


lol, short 5 minues before, cover 5 minutes after, seems like a sure way to make some money lol.


----------



## Belguy

It looks like the market is not going to give back last week's losses. There are a lot of economic problems in the world right now. It will be interesting to see if we can end the year in positive territory but I'm not betting the house on it.


----------



## Argonaut

The debt deal clears the Senate, and the markets immediately sell off even harder. I'm making money with my puts but it feels pretty dirty.


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## Four Pillars

My take is that the markets never believed that the deal wouldn't get done, so when it got done - there was no rebound.

I don't think it's dropping because the deal got done (not that anyone is suggesting that).


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## ddkay

Looks like we're going to break the head and shoulders neckline soon. This is the 8th red session in a row. I don't think QE will fix it, and even if it could, the new budget deal basically says it's not possible until 2012.


----------



## andrewf

I don't think the promises not to do a QE3 are credible. If inflation expectations start falling, they need to start inflating again.


----------



## Larry6417

Even though the debt ceiling was raised, doing so revealed the extent of dysfunction withing the American political process. Some of the bond rating agencies have already stated that they may downgrade U.S. debt anyways. I've been reading some of the reaction to the debt deal, and no one seems happy about it. The cuts don't go as far as the Tea party wanted. Others (like Paul Krugman) fear cuts at a time of weak economic growth will push the economy into recession - a perfectly reasonable fear. Neither political party did well. The Republicans looked like extremists willing to sacrifice the economy while President Obama looked weak.


----------



## ddkay

Treasury can't add to the money supply and do QE POMO coupon purchases without issuing new debt to the primary dealers.

The only way QE can have a meaningful effect is if they raise the debt ceiling again before next election. By signing today's deal they pretty much accepted deflation (even though Bernanke and Paul Krugman are fuming about it).


----------



## Abha

I am getting schooled so hard by the markets today.

Already down 5%

In any case, I'm going to sit on my hands before I do more damage.

If Apple breaks below 390 I know we are in trouble.


----------



## ddkay

SPX market makers in CBOE pit think we'll be at 1200 by next week, so far they look right about the 1250 call. Welcome to the new* bear cycle. 

Hopefully it doesn't last longer than 18 months...


----------



## andrewf

Abha said:


> I am getting schooled so hard by the markets today.
> 
> Already down 5%
> 
> In any case, I'm going to sit on my hands before I do more damage.
> 
> If Apple breaks below 390 I know we are in trouble.


Don't worry, it'll be at 800 in two years.


----------



## Yudansha

Abha said:


> I am getting schooled so hard by the markets today.
> 
> Already down 5%
> 
> In any case, I'm going to sit on my hands before I do more damage.
> 
> If Apple breaks below 390 I know we are in trouble.


Me too. Call me crazy but...was I the only one expecting markets to rise after the debt deal? 

I think I should now do the exact opposite of whether I feel like buying or selling. So far I haven't made a good transaction all week.


----------



## andrewf

ddkay said:


> Treasury can't add to the money supply and do QE POMO coupon purchases without issuing new debt to the primary dealers.
> 
> The only way QE can have a meaningful effect is if they raise the debt ceiling again before next election. By signing today's deal they pretty much accepted deflation (even though Bernanke and Paul Krugman are fuming about it).


The treasury doesn't implement QE, the Fed does. They buy bonds, generally but not necessarily treasuries. They could buy baskets of private bonds, too. They could even buy equities.

QE has nothing to do with the fiscal policy of the government. Essentially it's a matter of the Fed chasing private investment out of 'safe' assets and into riskier assets, lowering cost of capital and raising asset prices. This hopefully stimulates investment, and at least punishes people hoarding cash, preventing a liquidity trap. If people want to hoard cash, the Fed will shove it down their throats.


----------



## Jon_Snow

I'm sorry for those who are seeing losses in in their portfolios (been there). But I can't help but lick my chops at the buying opportunity that may present itself soon. I missed out on the March 09 lows and cursed loud and often about it... I doubt we will test those lows, but...


----------



## Abha

I'm waiting to deploy more cash as well but this really is a scary market.

Hang in there guys. It will get better


----------



## brad

All I can say is that I'm glad I'm a long-term investor so I don't have to pay attention to any of these short-term gyrations. And since secular trends can't be predicted with any useful degree of accuracy, I don't pay attention to those forecasts either.


----------



## Homerhomer

Jon_Snow said:


> I'm sorry for those who are seeing losses in in their portfolios (been there). But I can't help but lick my chops at the buying opportunity that may present itself soon. I missed out on the March 09 lows and cursed loud and often about it... I doubt we will test those lows, but...


You may be correct, but just to play devil's advocate:

1) you (and I) probably thought the same thing last summer, it looked pretty bad, over 10% drop, and look what happened after ;-)
2) there is plenty of cash sitting on the side lines, most of the talking heads I hear on tv admit to raising cash in some shape or form, this may support the markets big time
3) QE3 or some other stimulus
4) equity prices are supported by weak US dollar, strong earnings are partly due to foreign exchange

How confident are you the markets will tumble?

On the other hand:

1) all indications are that US economy in big doodo
2) exceeding or meeting expecations doesn't seem to satisfy the markets anymore
3) corporation revise down the earnings, indicate weak orders
4) Asia slowing down
5) politicians
6) cut in US government spending
7) Europe

Maybe the markets will tumble, dow down 200 ( edited in, make it 260, I am a slow typist ;-)last checked, all major supports are being tested?

I am not willing to bet everything one way or the other, not likely to be 100% in equities any time soon, too scared to short, my plan is to be half pregnant, may purchase something here and there if I find it cheap enough, and buy more if we continue to go down but make some money if the market goes up.


----------



## Four Pillars

Jon_Snow said:


> I'm sorry for those who are seeing losses in in their portfolios (been there). But I can't help but lick my chops at the buying opportunity that may present itself soon. I missed out on the March 09 lows and cursed loud and often about it... I doubt we will test those lows, but...


Jon, have you considered buying in a little bit when the market goes down? (like now?)

It sounds like you are hoping to move all into the market at the exact market bottom which might be quite difficult. You didn't do it in March 09 so what makes you think you can predict the next bottom perfectly?

I'm not trying to question your ability to predict the markets, just your ability to predict them perfectly.


----------



## Assetologist

Jon_Snow said:


> I'm sorry for those who are seeing losses in in their portfolios (been there). But I can't help but lick my chops at the buying opportunity that may present itself soon. I missed out on the March 09 lows and cursed loud and often about it... I doubt we will test those lows, but...


I caught the 2008/2009 dip and leveraged in reasonably well and now I am waiting for the big drops of 2011 or 2012 or 2013 or or or.....

Big Ups and Downs come and go with tons of noise in between. 

It is actually difficult to catch the true bottom but with low trading fees a bunch of smaller 'trades-in' can work well.

I can tell you that collecting steady dividends makes the noise much more insignificant other than opening a window to interesting observations of human behavior.

One should only invest in equities IF one really believes in the LONG-TERM growth of business/revenues/markets otherwise the frequent shifting sand would make one unstable and prone to making unwise decisions that could adversely effect their personal well-being and wealth.

One decision investments are best and there are probably less than 50 companies in the world one should invest in their core equity portfolio.

I am a 100% equity guy at this point in life which may not be appropriate for everyone so take my words with that in mind.

My sermon for the day to those who worry about a 5% or 15% change.

PS: I'm about 45% cash (accumulated from work income and sales of cyclical stocks) at this point and initiating little starter positions which help me keep an eye on my stocks of interest.


----------



## Belguy

Just about anybody can make money in rising stock markets and many brag about it!!

And then, there are times like this!!


----------



## Assetologist

Times like these come and go and have always been part of the market madness. 
One way to make money in rising stock markets is to buy before they rise but that means going against instincts of self-preservation and that is not easy


----------



## Homerhomer

Belguy said:


> Just about anybody can make money in rising stock markets and many brag about it!!
> 
> And then, there are times like this!!


What happend to invest in broad indexes, rebalance, diversify and prosper 

What do you mean by times like this, according to this chart we are barely off the recent high, and much closer to the all time top than bottom from two years ago, we are doing pretty good ;-)

http://finance.yahoo.com/echarts?s=%5EGSPC+Interactive#chart1:symbol=^gspc;range=5y;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=off;source=undefined


----------



## Betzy

Homerhomer has a point, if you look at the long term charts we are still on the same line gradual uptrend, in fact the 2008-09 looks like a correction for many stocks! I do say that that word does nothing for me.
How about we call it a "buy opp" instead.


----------



## ddkay

I wonder when/if the real long term channel snaps in the other direction. Could be in the next few decades.. or maybe not. Socialized health care vs. pensions. Maybe there will be a real revolution - only one of those programs can be changed from the core and save money in the long term, if Americans got radically serious about food choices/product labeling and lived healthy/active lifestyles.


----------



## Jungle

Assetologist said:


> Times like these come and go and have always been part of the market madness.
> One way to make money in rising stock markets is to buy before they rise but that means going against instincts of self-preservation and that is not easy


It makes it a great time to buy or add positions, however buying stocks at the bottom of the dip is not easy. Half the time I buy, I see it go lower, but then rise up and above over the longer term.


----------



## Abha

http://stockcharts.com/freecharts/historical/spx1960.html

Focus on the long term picture and don't panic with these fluctuations.

The smart guys (Goldman Sachs, Hedge Funds et al.) always wait for these flush outs to get better positioning in the markets.

The best opportunity to jump in is when the margin calls come in and the market flushes out those who can't handle the risk.

We are not at that point yet, but we're getting close. Also I hear a lot of talk about going back into a recession. 

If we are entering another recession then those of you waiting with cash on the sidelines will get an even better opportunity to buy stocks.


----------



## humble_pie

hello, this is the vanguard of the movement to change the title.

the cowardly custardy chickenpoop yellow title.

speaking of colour ddkay what did you do with those nifty little red boxes in the first version of your chart.

and - the imagination runs wild - why are you starting at 1928. Why not go back to the 17th & 18th centuries. The east india company. The lust for empire brought home in sailing ships.

somebody must have done a chart like that. With a chart like that, we probably look low-to-normal where we're at today. Miles to go before the bubble top.


----------



## Homerhomer

Every simple read for nervous equity investors, once again the beauty of dividends speaks for itself, not only you get paid but are also happy to see down market because you can buy cheaper. For anyone with long term horizon imagining the yields double or triple by the time they retire is a nice thing to ponder about when they see red in their portfolios. Not bullet proof as one still has to pick the right equities and preferably at the right time, but better than crapping their pants everytime the index goes down by few percent.

http://www.theglobeandmail.com/glob...things-to-do-in-a-down-market/article2117470/

And I always highly recommended dividendgrowth.ca


----------



## larry81

anyone having nightmare's over a 10% drop should reconsider his assets allocation and ultimately... risk tolerance

personally i am having fun, lets hope everything is going down the toilet


----------



## ddkay

@humble, this s&p data only goes back to 1928, and the dow only goes back to 1900.. it would be cool to see a global index that went back to the 17th century though

Like Abha said, we're basically in oversold territory, so the market is "due" for a bounce (don't think about shorting it here), but none of the indicators I use have given me a buy signal yet.. it will come eventually. If I do get a buy signal I also don't expect the rally that shoots over 1300 again. Even if the Fed can continue to QEueeze or QEWW3 like andrewf says - with the non-action in the recently signed Budget Control Act of 2011, the jobs crisis shows little signs of improving. Stuff like Obama's vision for infrastructure spending have basically been thrown out the window.

Congress has a five week recess, after that it's possible Obama will go back and collect enough votes to override the budget caps.


----------



## larry81

ddkay said:


> @humble, this s&p data only goes back to 1928, and the dow only goes back to 1900.. it would be cool to see a global index that went back to the 17th century though


FYI, a mixed set of data does exist
http://www.globalfinancialdata.com/Databases/Data.html#Equities_to_1693


----------



## Homerhomer

Abha said:


> http://stockcharts.com/freecharts/historical/spx1960.html
> 
> Focus on the long term picture and don't panic with these fluctuations.
> 
> .


On this chart the last decade looks similar to the period between 1965-1975, the main difference the current top is much lower the last top of 40 years ago, if the history were to repeat itself we may be seeing S&P 500 at 500 in not too distant future ;-)


----------



## ddkay

@larry81 but that's not publicly accessible for charting/analytics.. I meant it would be nice if there was one included in thinkorswim Prophet Charts, but it's not possible the way they programmed it now cause the Java epoch is 1900 (like Unix is 1970). Cool site though, I might call their sales once I'm a millionaire and bored.


----------



## ddkay

The afterhours daily candle on ES_F is trying to green above 1248.25.. overnight it will probably test the 2011 intraday low of 1241.45.. 

I was looking back at the 2008 selloff (because there's few reference points with 7 down sessions), between 10/2/2008 - 10/13/2008 S&P500 sold 277pts from 1168 in 7 red candles, then bounced up 125pts to 1016.75 green on the 8th session. We've recently had a few days that looked like a relief rally but never materialized.. it eventually has to, however short, but the overall trend is still down.


----------



## ddkay

A few chartists I follow are talking about a head and shoulders top in AAPL, watch out Abha! edit nvm those messages were from 10 hours ago, it broke the neckline at 390 (the sell target you had) towards the 4pm close http://i.imgur.com/tHndO.png


----------



## Abha

ddkay said:


> A few chartists I follow are talking about a head and shoulders top in AAPL, watch out Abha! edit nvm those messages were from this morning, it already broke the neckline http://i.imgur.com/tHndO.png


I hope Apple drops....so I can buy more.


----------



## larry81

Asian markets are down ~2% as i write this


----------



## ddkay

Balance sheet recessions.. our under-performing recovery in one chart


----------



## kcowan

Long term, the market tracks GDP growth so the current swing is reacting to the revision downward of 1Q and the lacklustre 2Q. Companies that are bucking this trend will do well.

1Q was 1.9% now 0.4%! This is what spooked the market.

2Q 1.3% now but do we believe it? If they got 1Q so wrong, what confidence do we have on the 1.3%? 

GDP estimates

Long version


----------



## ddkay

Does that mean it has 3 years of correcting to do?










07:1 on the x-axis = 2007, Q1


----------



## andrewf

Credit where due: that chart is by Stephen Gordon at Worthwhile Canadian Initiative.


----------



## ddkay

Indeed ^


----------



## ddkay

Here comes the desperate bounce, if S&P clears 1260


----------



## Argonaut

S&P up 0.5%, Dow up 30 points. A bit of a weak bounce, but it stopped the freefall. Have we seen a near term bottom, or was today just a dead cat? It will be fascinating to see. We will only find out at opening tomorrow.. the Asian markets and futures are complete crap as indicators, the markets are run by what happens in the US trading session.


----------



## ddkay

The 200 day trend line is @ 1260, it closed right on the dot so sentiment is still neutral. After 7 straight days making lower lows a green candle was eventually inevitable. There is still lots of macro data on the table - employment index, DoL jobless claims, BLS employment situation...

I think rumours flying about QE3 and Jim Cramer telling people to buy gold and talking about the S&P head and shoulders pattern on CNBC made Mr. Market a little more optimistic going into the close.

Richard Koo says in Japan keeping the interest rates at 0% when everybody was paying down debt (deleveraging) and not borrowing didn't help... QE1, QE2 didn't help employment in the US, QE3 won't help either... especially if oil goes north of $100 again. US businesses are doing great with sales overseas and are just happy not hiring a significant amount of people.


----------



## Cal

What number would the TSX have to drop to to have it considered a double dip? Below 10,000?

This is a buying opportunity.


----------



## gibor365

ddkay said:


> I think rumours flying about QE3 and Jim Cramer telling people to buy gold and talking about the S&P head and shoulders pattern on CNBC made Mr. Market a little more optimistic going into the close.



Peter Schiff said that QE3 is already running and will be announced later


----------



## gibor365

Argonaut said:


> S&P up 0.5%, Dow up 30 points. A bit of a weak bounce, but it stopped the freefall. Have we seen a near term bottom, or was today just a dead cat? It will be fascinating to see.


Yeap, it's very interesting.... and chances IMHO for any direction 50/50, exactly like in rouletta 
I think all depends on this/next week economical data from US.. couple of good reports and stock can sky rocket and vice versa...

I less consern about losses in registered accounts (mostly hold index ETFs , REIT and dividend stocks) ... hopefully it will rebounfd in 10-15 years when I'll need those money.

Another story with RESP, will need it in 2 years, making it more and more conservative, move bunch of indexes to bonds in June and today. For last couple of months the best performer in my RESP TD Real Return bond.


----------



## fatcat

it seems like it will never change but this weeks payroll numbers on friday will be very big ....

i feel like a whack of good news or the reverse could push this market in either direction


----------



## Jon_Snow

Good grief... what to do with my cash? I have no frickin' idea whats going to happen next. Could see things going up for much of the rest of the year, or there could be a double dip... I'm leaning toward sitting on my cash for the rest of the week. I agree that Fridays job date is gonna be HUUUUUGE.


----------



## Jungle

I'm waiting until the jobs report comes out Friday. It should send the market lower.


----------



## Abha

Jon_Snow said:


> Good grief... what to do with my cash? I have no frickin' idea whats going to happen next. Could see things going up for much of the rest of the year, or there could be a double dip... I'm leaning toward sitting on my cash for the rest of the week. I agree that Fridays job date is gonna be HUUUUUGE.


You'll never make money sitting on the sidelines. Why not test the markets with a small allocation. Maybe 20%

I think you're going to miss another opportunity and now's as good a time as any. 

It's not my money so the choice is ultimately yours, but I know that you'll be kicking yourself if QE3 starts and we get that artificial rally in stocks again.


----------



## dogcom

Why not wait and see if they do start a QE3 before getting in. At the moment there is just to much risk going into a fall that could get ugly. I am just holding XTR and a gold fund at the moment and have held these positions for the past couple of months. 

QE2 was announced at the end of October into early November last year and you would have done well after that announcement until March or April of this year.


----------



## fatcat

> I'm waiting until the jobs report comes out Friday. It should send the market lower.


 why ?

i think a a really bad number would have the potential to spook people and initiate another down leg

a really good number is probably unlikely and a _sort of_ good number would probably do nothing since investors are so spooked


----------



## KaeJS

Futures are up, Asian markets are up

-- But I gotta tell ya... I'm scared shitless.

Even Suncor posts decent earning for Q2, and they are trading at $34 now? What the hell... Were they not $44 like a few months ago?


----------



## Belguy

Buy, hold, and prosper!

You can't properly time the markets except by blind luck!!

I stay pretty much 100 per cent invested at all times and stick to my target asset allocations and let the chips fall where they may.

Buy, sell, buy, sell--it makes my head explode!!


----------



## doitnow!

*How to minimize market triggered anxiety?*



Belguy said:


> Buy, hold, and prosper!
> 
> You can't properly time the markets except by blind luck!!
> 
> I stay pretty much 100 per cent invested at all times and stick to my target asset allocations and let the chips fall where they may.
> 
> Buy, sell, buy, sell--it makes my head explode!!


Hey Belguy, you make sense, coming from a guy who doesn't try to time the market. But, I am getting more than a little anxious watching my RRSP losses add up.

Currently I hold 40% XSB, 20% XIC, 20% VEA & 20% VTI.

Are there any changes to this portfolio any of you more experienced investors could recommend to minimize my anxiety? Only been a dyi for a couple of months and now sweating a little.


----------



## Abha

doitnow! said:


> Hey Belguy, you make sense, coming from a guy who doesn't try to time the market. But, I am getting more than a little anxious watching my RRSP losses add up.
> 
> Currently I hold 40% XSB, 20% XIC, 20% VEA & 20% VTI.
> 
> Are there any changes to this portfolio any of you more experienced investors could recommend to minimize my anxiety? Only been a dyi for a couple of months and now sweating a little.


If you have 10+ years until your retirement then do nothing. The losses are only on paper right now. I know everyone is spooked right now but the reality is, a few good days or weeks in a row and nobody on this board will be screaming Armageddon. 

It's the nature of the crowds to get caught up in a frenzy and the media doesn't help by sensationalizing the news however dire it may be.

I know you are hurting inside looking at the losses, and believe me a lot of people are in the same boat as you, but just put it into perspective. Markets don't always go straight up and they don't always go straight down.


----------



## daddybigbucks

Belguy said:


> Buy, hold, and prosper!
> 
> 
> I stay pretty much 100 per cent invested at all times and stick to my target asset allocations and let the chips fall where they may.
> 
> Buy, sell, buy, sell--it makes my head explode!!


100%?

where do you find money when you see a scream of a deal come out of nowhere?
I am usually 70% invested but always like to have cash around for great deals (ie RDS.B after the bp disaster)


----------



## Abha

You know who should be wearing diapers right now. 

DNDN shareholders. 62.5% drop post earnings.


----------



## KaeJS

Abha said:


> You know who should be wearing diapers right now.
> 
> DNDN shareholders. 62.5% drop post earnings.


Thats what you get for investing DNDN


----------



## ddkay

Yeah, what the heck is DNDN? 

I read a great opinion piece tonight by Josh Brown: Leaving The Party Early



> In my younger days I was usually one of the last people to leave the party - any party. Because my parents liked to go out on Saturday nights, many of the parties took place at Chez Downtown.
> 
> In my early twenties, living in New York City on a six figure income, the parties got wilder and stretched out into whole weekends. A schmuck like me could start off at an Upper East Side Irish pub for happy hour, continue on to dinner, then a few clubs and the next thing I know, I'm in Atlantic City at 3 o'clock in the morning on Sunday. At 23, you could still do that stuff and be at your desk 8 am Monday morning almost fully recovered. Now I'd probably be dead.
> 
> When I got married, I started saying NO to my unmarried friends so that I could stay married a while longer. But on the few nights out with the boys when, well, "time got away from me," I managed to learn a very important lesson: *Nothing good ever happens after 2 am*.
> 
> My wife eventually drilled this into my head, with hundreds of voice mails, texts, and handwritten notes on my pillow. It took me awhile to come around but, eventually, I got it.
> 
> The hot girls don't miraculously show up after 2 am, neither does the Swedish House Mafia with their turntables, and no one ever "hits their stride" at the blackjack table all of a sudden either.
> 
> On the flip side, being home and in bed at 2am gives you the whole next day to do non-Vampiric things, like live life and bask in the sunshine. You can get things done at home or get out early for a run. But the longer you stay at the party the night before, the less likely it is that you'll accomplish any of that.
> 
> Which brings me to my point (I promise, there is one)...
> 
> Lowering exposure to the market this week feels a bit like having left the party early. I can still hear people laughing inside the apartment, the muffled bass from the stereo is echoing off the hallway walls on my way to the elevator. But the thing is, I have stuff I want to accomplish with my capital...in the morning, later this summer, later this fall.
> 
> Will the aging cyclical bull market climb yet another Wall of Worry even as economic data worsens and internals weaken? Will Mila Kunis and Michelle Rodriguez kick the door down at the party and demand a couch they can make out on? I suppose these things are possible. But a lot of things are possible, I can only go by what the data says is more probable. (Barry laid out the case for lightening up at The Big Picture this morning.)
> 
> Should the bull market persist and take out new year highs, I'll be along for the ride even if underinvested. But that would be merely a bittersweet outcome still affording me other options - there are much more painful outcomes available as anyone who's stuck around at a few parties too long will tell you.


----------



## gibor365

Abha said:


> I know you are hurting inside looking at the losses, and believe me a lot of people are in the same boat as you, but just put it into perspective. Markets don't always go straight up and they don't always go straight down.


Yeap, it hurts, and I just try to convince myself that all my investments in registered accounts and TFSA that I will need in 10+ years...
I;m invested about 50%, another 50% I just keep in cash , HISA with 2%... we like to travel a lot, at least twice per year flying somewhere and I just don't wanr be too dependant on market.
Now within those 50% invested , I have about 15K cash from sellimg AAPL, AGNC, CPG... also in big doubt what to do, probably wait until Friday report.


----------



## sags

It looks like company insiders are "leaving the party" as well.

According to one measure, the ratio of sold shares to bought shares, is at the highest level since the data has been collected since 1974.

US data..........but that does tend to cross the border eventually.

http://www.marketwatch.com/story/in...e-2011-07-28?source=patrick.net&Link=obinsite


----------



## sensfan15

KaeJS said:


> Futures are up, Asian markets are up
> 
> -- But I gotta tell ya... I'm scared shitless.
> 
> Even Suncor posts decent earning for Q2, and they are trading at $34 now? What the hell... Were they not $44 like a few months ago?


Suncor is looking attractive right now...But have been looking at BNS, SLF, POW

I have $5000 to deploy...


----------



## ddkay

I noticed in some cases Suncor runs ahead the price of oil

Suncor peaked at $74.28 on 05/21/2008
Oil peaked at $147.30 on 7/11/2008
YTD Suncor peaked at $48.53 on 03/07/2011
YTD Oil peaked at $114.825 on 05/02/2011
YTD Suncor bottomed at $35.38 on 08/03/2011
YTD Oil bottomed at $83.88 on 2/15/2011
Today Suncor is $36.00
Today Oil is $91.78

It's probably not the right way to analyze it though cause Suncor extracts synthetic crude (opposed to Light crude which WTI price is based on)

On this topic (since it relates to deflation), from stuff I read I'm betting QE3 won't be considered until Oil sells down to at least $80 again


----------



## Argonaut

My target price for aggressive buying is S&P 500 at 1100. That is the level it was at before QE2 was initiated. Obviously this means I'm ultra bearish, but I see no catalyst to move the markets forward at all. QE3 would be a very tough sell given the new debt deal and the ineffectiveness of QE2. 

Of course, my outlook on anything non-gold related is 50/50 at best. The good news is that gold would benefit during a bear market as well as a QE3 situation for different reasons (safety and inflation).

By the way, the Yen is getting blown up right now. I've never seen a currency move so much in one day. Bank of Japan obviously selling it en masse.


----------



## ddkay

The Fed bases their intervention target on inflation.. last time QE kicked in when oil was $70. So that's roughly my target too. Just in case there is no QE, though, I'm not aggressive buying anything... 

The only bull cases are a dead-cat bounce based on technicals (the MC Hammer candle), and the permabulls point to high earnings (but forget those almost only exist thanks to inflation).

"Costco Wholesale Corp. (COST) said its same-store sales rose 10%, with much of the increase due to inflation in gasoline prices and strengthening foreign currencies."

Meanwhile, the bear cases are high unemployment, 15% of the country is on food stamps, low GDP, crappy debt deal that trades stimulus for austerity, Europe... am I missing anything?

Oh yeah.. government agencies (FAA) is shutdown and Congress is on recess until September


----------



## ddkay

Not today Dorothy,

"$SPY Weekly 8/5 123 puts are the most active options contract so far. 25K trade - 55% executed on the offer"


----------



## Argonaut

My own S&P puts are making this an easy correction to stomach. I'm thinking of buying more and more and more, but then I remember pigs get slaughtered. Especially short pigs.


----------



## ddkay

My target to consider going long on Canadian stocks again is when the TSX is under 9000 (~30% downside)


----------



## Belguy

I find it interesting how economic sentiment can change so suddenly. If you just got back two or three months on this forum, you can read about all sorts of optimism and very few warnings of impending doom. The markets were not tanking and were at least holding their own. Most pundits were predicting a better second half of the year for stocks. And yet we all knew about the European debt crisis which is now considered the underlying cause of the current sudden market swoon. 

I believe that optimism would return to the markets if a solution could be found to the European debt crisis. However, what concerns me are the statements being made that this crisis will not be solved in our lifetimes or that it is completely unsolvable!

Markets have always rallied once they reach their bottom. However, if, indeed, we are dealing with a European debt crisis that is either unsolvable or that will not be resolved in our lifetimes, then what does that mean for stocks over the next say 40 years? 

Is the only money to be made coming from short term trades rather than longer term buying and holding? Is another potential solution to hold only large cap stocks of companies that you feel can weather the storm over the very long term with a history of paying good dividends and of increasing those dividends over time? Or, what about tilting your portfolio heavily in favour of gold even at these historically high prices? Any other suggestions for the next several years?


----------



## blin10

Belguy said:


> I find it interesting how economic sentiment can change so suddenly. If you just got back two or three months on this forum, you can read about all sorts of optimism and very few warnings of impending doom. The markets were not tanking and were at least holding their own. Most pundits were predicting a better second half of the year for stocks. And yet we all knew about the European debt crisis which is now considered the underlying cause of the current sudden market swoon.
> 
> I believe that optimism would return to the markets if a solution could be found to the European debt crisis. However, what concerns me are the statements being made that this crisis will not be solved in our lifetimes or that it is completely unsolvable!
> 
> Markets have always rallied once they reach their bottom. However, if, indeed, we are dealing with a European debt crisis that is either unsolvable or that will not be resolved in our lifetimes, then what does that mean for stocks over the next say 40 years?
> 
> Is the only money to be made coming from short term trades rather than longer term buying and holding? Is another potential solution to hold only large cap stocks of companies that you feel can weather the storm over the very long term with a history of paying good dividends and of increasing those dividends over time? Or, what about tilting your portfolio heavily in favour of gold even at these historically high prices? Any other suggestions for the next several years?


look what happened in may-july 2010, everyone was saying double dip, and markets rallied after... nobody knows what will happen, but I learned my lesson in 09, when it seems like the end of the world that's when you take a chance.... in order to make money you will need to be in red for sometime without freaking out


----------



## ddkay

Well, for the record I've been pretty bearish since Spring lol. I sold everything except my bullion gold which makes up for roughly 2% of my portfolio, and spent another ~3% of my portfolio on silver and stock option calls expiring in June '11, August '11 and January '12 hoping there would be a turnaround but so far it hasn't materialized.

Looking back at the S&P500 monthly chart, it's pretty clear the market has been oversold since December 2010, for the first time since November 2007, and the first sell signal triggered on June 1, 2011. Now the MACD crossed and RSI is under 55 which is very bearish. http://i.imgur.com/ZWnfg.png


----------



## Kidbrosweets

here's one, for all those investors that go away for summer what do they do scramble back to work?


----------



## Belguy

They may scramble back to work only to find that their office/cubicle has been cleaned out!! Nobody much is hiring but many large companies are in the process of pruning their work forces. Also, governments will be cutting back on their staffs to offset smaller budgets. How can the stock markets reverse direction if consumer confidence is reduced due to fear of job loss or by the experience of losing a good chunk of their savings in the stock market?

How and when will sentiment be reversed?


----------



## ddkay

Loads of bank head desk managers and traders are on holidays this month, it couldn't be a worse time for the market to crash


----------



## fatcat

> I find it interesting how economic sentiment can change so suddenly.


 i wonder if we really are in a "new normal" ... i have been wondering what the effect of the internet is on investing .. the whole world is now glued to their computer screens reading the same economic news ... the potential for rapid change seems ever-present and irrational ... hope and fear rule the day, not the fundamentals


----------



## kcowan

Will S&P 500 at 1130 be another ledge on the way down? Or a firm foundation for a bounce?


----------



## HaroldCrump

It is extremely unfortunate that this crash is occuring in the midst of some pretty good earnings (for the most part).
Most of my companies have reported very strong results in the past few weeks, with one particular company quadrupling its net earnings YoY.
However, all of that good news is getting lost in this cacophony and everything is getting sold off indiscriminately.


----------



## ddkay

What do earnings have to do with the economy? Most of that is coming from cost cutting (massive layoffs, temp workers) and overseas growth - not domestic top line growth. That's the only bull case. The only reason the markets have been going up for the last 3 years straight is because of Fed intervention.


----------



## Yudansha

Hmm wondering if I should sell my XIV now for a 12K loss and join the bears or hold out for a small bounce up to sell?


----------



## Jungle

Never sell! It's tough to hang on, but it will come back. Have faith. If it helps, look at this as a great buying opportunity and add to your positions.


----------



## ddkay

^ The epitome of moral hazard


----------



## Abha

Jungle hit it on the head. This isn't my first time at the stock market rodeo either. 

Sure this is worse than 2008 but think logically. Is Wal Mart going to disappear overnight? What about Suncor? Microsoft? and so on.

Buy the pain and prosper (BUT DON'T BUY JUST YET)


----------



## blin10

Abha said:


> Jungle hit it on the head. This isn't my first time at the stock market rodeo either.
> 
> Sure this is worse than 2008 but think logically. Is Wal Mart going to disappear overnight? What about Suncor? Microsoft? and so on.
> 
> Buy the pain and prosper (BUT DON'T BUY JUST YET)


why not, spy sitting at the nice support, I would start low positions (i did)


----------



## Abha

blin10 said:


> why not, spy sitting at the nice support, I would start low positions (i did)


Technical analysis means nothing in these type of markets. I will base my moves while watching the markets between 3pm - 4pm.

What I meant was for people who are cash heavy to not go all in based on today.


----------



## blin10

Abha said:


> Technical analysis means nothing in these type of markets. I will base my moves while watching the markets between 3pm - 4pm.
> 
> What I meant was for people who are cash heavy to not go all in based on today.


TA is everything, i'm not going to explain why, ganna waste my time... yes I'm not saying go all in either, but starting a small position is not bad right now


----------



## gibor365

Just wondering if anyone selling something? I just don't know what to do. I have a lot of index ETFs, mostly dividend stocks and XMA....


----------



## Belguy

Don't sell!! If anything, BUY!!!


----------



## Addy

gibor said:


> Just wondering if anyone selling something? I just don't know what to do. I have a lot of index ETFs, mostly dividend stocks and XMA....


Now is NOT the time to panic and sell! You should have cash ready to go on a buying spree in a case such as this!!


----------



## ddkay

blin10 said:


> why not, spy sitting at the nice support, I would start low positions (i did)


When you said that SPY was 1223, now it's made a new low of 1210.25. I use TA too, but good luck calling a bottom on a crash, price spears through every support level... MACD has been trending down now for an hour now of intense selling, all I know is that this isn't over yet.


----------



## fatcat

i think i would like to see the cloudiness settle to the bottom of the glass first ... 

my read of this is that it is based on some deep fundamental problems ... (europe, austerity, unemployment,debt)

it is the ultra-bear of all websites but you better be reading zerohedge.com for a really hair tingling look at how bad things are getting ... 

it makes you think that all those "fools" that are just laddering their GIC's might be on to something ...

a really bad jobs report tomorrow might seal the deal or if it priced in and there is no strong reaction to a bad number, maybe that will mean we are hitting the floor


----------



## blin10

ddkay said:


> When you said that SPY was 1223, now it's made a new low of 1210.25. I use TA too, but good luck calling a bottom on a crash, price spears through every support level... MACD has been trending down now for an hour now of intense selling, all I know is that this isn't over yet.


i can't see the future... and I never said I can call bottom with TA, you could see next support level and maybe add some more shares, if it sinks lower you can see what's the next level... I never said SPY is at great support you should go all in because it will rally


----------



## Yudansha

With a nearly 3% drop for the markets I am expecting some kind of a rebound next week, I don't think the jobs data will pull a turn around for tomorrow, you never know. 

I do think there is a lot of cash on the sidelines ready to jump in at some point though. I have moved some funds out of fixed income into cash to put my self in a better position for a rally.

3% drop is quite quick though.


----------



## Mockingbird

Covered all short positions. Taking some long positions with tight stops.

MB


----------



## Abha

I can't imagine a bad jobs report tanking the market another 1 - 2%

We all know how bad the economy is so I suspect that the bad news is already priced in.

What I'm counting on is that even a modest job reports will spur a rally. I think even the slightest bit of positive news will give way for a rally that will be promptly slapped down and shorted again by the smart money.


----------



## ddkay

Oil is coming close to $70 again ($86.98), QE3 is looking more likely even though it doesn't really work


----------



## Abha

I'll take an artificial rally over this bloodbath any day of the week.


----------



## andrewf

QE works, it's just not a cure-all. Its only job is to prevent a deflationary spiral a la 1930s. It's working splendidly, keeping inflation in the Fed's desired range (when it had fallen to 0% and looked to be headed negative). QE does not fix all the structural problems with the economy or put a chicken in every pot.


----------



## dentist101

hey HUMBLE, do you still think that my headline is yellow, chicken **** and cowardly? hmmmmm, it doens't really look like i wasn't just being a paranoid coward with no risk tolerance today. this was exactly what i was wondering could happen, and guess what?.....

read the headline again and see what i was worried about after today's debacle.


----------



## Causalien

I haven't short and I haven't bought. The reason being, that I swing for home runs. None of these options ****. But a full on 100 all in+ leverage buying of stocks once QE3 is announced. Le Bernanke is once again on my spotlight.


----------



## fatcat

> I haven't short and I haven't bought. The reason being, that I swing for home runs. None of these options ****. But a full on 100 all in+ leverage buying of stocks once QE3 is announced. Le Bernanke is once again on my spotlight.


but what if, having seen what followed qe2 (a nice pop up and then this) everyone is buying and then immediately looking for the exit ? ... that would be a wonderful trip down high blood pressure alley

the fundamentals won't be changed by qe3


----------



## ddkay

Today's sell off isn't even about the US fundamentals. It's because Italy and Spain and Ireland and Portugal had bond auctions on the open market for the first time since March..

Instead of the ECB purchasing bonds from all of those countries, they only bought Ireland and Portugal. Even if they had INTENDED to buy Spain and Italy, they didn't do it in a timely manner, giving the impression they were not prepared to risk a huge debt load from those specific economies.

So everyone sold off Italian and Spanish bonds, and the rest of this action in stocks and commodities is the effect of thousands of margin calls and firm-wide deleveraging across asset classes to maintain their capital ratio and cover losses.

There were also other structural changes that made investors worried:



> "The market’s disappointment with the apparent half-heartedness of the bond-buying overshadowed the ECB’s other measure, namely the reintroduction of an unlimited offering of six-month money. This tool was used through 2009 to ensure that banks kept access to liquidity even if they were shut out of wholesale funding markets.
> 
> The only trouble with it was that it encouraged banks to rely too much on the ECB, encouraging an addiction that it is now finding impossible to break—lending to banks in Greece, Ireland, Portugal and Spain accounted for two-thirds of its total credit in June."


----------



## humble_pie

ddkay i'm a huge fan of your op-ed pages. But i wonder how much one can pinpoint a rational trigger for today.

more & more i'm thinking that from time to time the big money players collude, on an unorganized ad hoc basis, to beat the stuffing out of markets. Any excuse will do. There's always some war going on, some country in trouble or some hiccup from china to blame.

i don't mean conspiracy, i mean simple convenience. It's normal, explainable, convenient that a correction should happen right now. Even the timing is good. With a bit of luck for the US & france, it'll all be over before elections. 

in 1998, in 2002, in 2009 we saw how fast the pillage was over. It was only a matter of months. Presumably, each time the big money got itself back in near the lows so the madhouse could start up all over again.

btw when you call 30% on the downside for the tsx, do you mean from today or from the hi's of 2011.


----------



## doitnow!

dentist101 said:


> hey HUMBLE, do you still think that my headline is yellow, chicken **** and cowardly? hmmmmm, it doens't really look like i wasn't just being a paranoid coward with no risk tolerance today. this was exactly what i was wondering could happen, and guess what?.....
> 
> read the headline again and see what i was worried about after today's debacle.


Ok...you were right...but what to do now: Sell ETF's cause there is a high probability that they'll do down more in the short term or stay in the game?


----------



## gibor365

doitnow! said:


> Ok...you were right...but what to do now: Sell ETF's cause there is a high probability that they'll do down more in the short term or stay in the game?


Personally...I'm staying.. iprefer to have losses "on paper" than sell and admit them. hopefully it will rebound in future


----------



## brad

dentist101 said:


> hmmmmm, it doens't really look like i wasn't just being a paranoid coward with no risk tolerance today. this was exactly what i was wondering could happen, and guess what?.....


But as I remember, you were going to be investing for retirement, which is a long way off for you. When you take the long view, blips like this, even if they last years, don't really matter.

If you're investing for the long term, there are basically three things that matter with regard to the equities portion of your portfolio: 1) how many shares you own, 2) what companies' shares you own, and 3) what they're worth when you need the money. You won't need the money for decades, so item 3 is not an issue right now. The value of the equities in your porfolio could drop all the way to zero but it still doesn't mean anything as long as the market recovers and grows in the years ahead.

This is the part that you don't seem to be getting -- you're stuck in the steady-growth mentality of a savings account, worried that you're going to "lose" your investment. As long as you diversify you're likely to end up okay. A good couch potato portfolio would have you diversified across thousands of individual stocks (Canadian Couch Potato's portfolio is diversified across more than 10,000). That's the key -- the smaller your portfolio, the more vulnerable you are. The more you spread the risk, the more likely you are to beat inflation over the long term, which is really all you need to do in order to do better than a savings account or GICs.


----------



## doitnow!

QUOTE=gibor;78438]Personally...I'm staying.. iprefer to have losses "on paper" than sell and admit them. hopefully it will rebound in future[/QUOTE]

I am also staying for the time being, although my horizon is but 10 years down the road. This has made me re-think my strategy though: I have 150K in cash, know next to nothing about dividend investing but like the idea of picking a few solid companies, holding them for the long haul and living off the dividends only later in life - at least 10 years down the road. 

Of course I am assuming that this complementary journey is less volatile and in the end more rewarding and a nice complement to the part of the portfolio I now hold 40/60 broad based etf's. 

Any comments on this strategy from couch potato and stock investors?

Problem I see is that I know absolutely zero of how to go about picking 6 or 7 good dividend stocks without having to do a lot of reading (I certainly don't have the aptitude for reading or understanding company financials, it puts me into a deep trance). Suggestions and advice on what to read, sites etc. appreciated.


----------



## leoc2

Hi folks,

I am an older foggy ...survived dot com bust and the 2008 financial bust ... losing not a penny (long story ... who knows maybe just luck). I went to cash this April (luck again?? don't know). I have learned from many here. Please consider waiting to see what the wall street boys will do in September when they return from vacation. Following their lead may be a good strategy. That is what I am doing now.


----------



## ddkay

^ Excellent advice. This is going nuclear soon, you dip buyers just don't realize it yet. "He who fights and runs away, may live to fight another day". I feel sorry for any folks on margin.

Historical DOW declines for some perspective - we just made the top 10
By points:
-- Sept. 29, 2008: 778 points, or 7 percent
-- Oct. 15, 2008: 733 points, or 7.9 percent
-- Sept. 17, 2001: 685 points, or 7.1 percent
-- Dec. 1, 2008: 680 points, or 7.7 percent
-- Oct. 9, 2008: 679 points, or 7.3 percent
-- April 14, 2000: 618 points, or 5.7 percent
-- Oct. 27, 1997: 554 points, or 7.2 percent
-- Oct. 22, 2008: 514 points, or 5.7 percent
-- *Aug. 4, 2011: 513 points, or 4.3 percent*
-- Aug. 31, 1998: 513 points, or 6.4 percent


----------



## kcowan

I have still got my core equity holdings. All of them are down today. I will stay the course. Some of them were taken out by takeovers and I had more cash.

I have cash proceeds from two RE sales that are still liquid. All my maturing bonds from the last 6 months are in cash. I have been waiting patiently. Maybe the time is drawing nigh. But there is no panic. I will see if any bargains materialize. I am looking for dividend-payers. I have a list of prospects that I have developed over the last 12 months.

So what I expected seems to be happening. I think there is a saying about this. Something about rewarding patience? Having the courage of your convictions?

But I could be wrong. It has happened before.


----------



## ddkay

The S&P has to break out of the down trend channel at ~1200 (as of tonight), and then break out of a second broken channel at 1220 for me to think about changing sentiment to bullish


----------



## dentist101

@brad - you're right brad, no doubt about it. btw, i wasn't trying to say "i told you so", but just that when i first started this post, i smelt something in the air and it seems that i may not have been crazy. long-term investing is what i'm after...hard to change mentality tho, but i'm learning. i cut my exposure in half last week, but i'm still in the game, and not freaking out here. i'm learning alot right now. 

what i was responding to was humble's irritating line about my headline. i WAS scared at the time! that's why i wrote it, ha! it wasn't offensive, just annoying that he wanted to appear fearless. we are seeing some potentially unpresidented things going on in the global economy these days. i'm not predicting gloom and doom, but if you can't admit that things are very strange/volatile, then i think you've got blinders on. 

i'm down 1.7% in my stock/bond portfolio....not a disaster by any means. i'm just trying to figure out where my "comfort zone" is, and be happy with it. 

i have alot of respect at the knowledge of many people on these forums. i think there is a ton of insight here...not perfect advice, but food for thought. it's also very interesting seeing each different personality come out thru the posts and when things are going down, like now.

i'm still smiling, ha!


----------



## dentist101

@ddkay - sorry to be so daft, but could you elaborate on the "going nuclear" thing? i'm assuming that you are saying that the bottom is going to drop out soon due to what's going on, as opposed to a big trend upward. what makes you think that today's big slide is not a momentary drop, but the start of something more? i'm curious...forgive my ignorance, i'm new to this.


----------



## Belguy

For better or worse, I am IN the market and IN the market I will now stay at least until I recoup my paper losses or die of old age, whichever comes first.

I have lived through it all before--all too many times for my liking--and so I will go to bed and sleep tonight and, if the market drops another 500 points tomorrow, I will go to bed and sleep well tomorrow night as well.

And, if the market continues to drop next week, then I will have a lot of company if I start to lose some sleep.

However, I have slowly come to the conclusion that I do not like this stock market game. After October 2008, I thought that we would be safe from another similar drop for a while and, even earlier this year, most were sounding optimistic that the worst was behind us.

Wrong!!!


----------



## Jon_Snow

I've got 100k in a GIC (matures in FEB @ 5.25%) and 150k sitting in different savings accounts... its been tough to read the Garth Turners of the world who seem to delight in ridiculing those who hold GIC's and cash. Well, that describes me perfectly...

Needless to say, I feel very fortunate in the position I am in now... I blew the opportunity that the 2008 correction provided investors. It is my intention not to blow it this time.

Please feel free to kindly inform me when we have reached the market bottom.


----------



## Argonaut

Jon_Snow said:


> Please feel free to kindly inform me when we have reached the market bottom.


No sense trying to find the bottom. Just get in when the 50 day moving average climbs above the 200 day MA. Better to be a month or two late than much, much too early.


----------



## fatcat

> I've got 100k in a GIC (matures in FEB @ 5.25%) and 150k sitting in different savings accounts... its been tough to read the Garth Turners of the world who seem to delight in ridiculing those who hold GIC's and cash. Well, that describes me perfectly...


 if that is what he is saying, he's an a##hole ... nobody should invest at any level beyond their comfort and tolerance for loss ... people that are building GIC ladders are looking pretty smart right now ... he's going to laugh at you for holding a 5.25% GIC, have i got that right ? 

what does he say about the lost decade in equities from 2000-2009 ??

where would we be without the "experts" ? .....


----------



## ddkay

@dentist01, I'm not smart enough to call a bottom. Like others here, I just don't see any catalysts, I don't see how this is temporary and going away... Today's move constitutes a panic sell - regardless if there are deals to be had, people are panicking and going into self-defense mode. People are blowing up their accounts because of margin. I had only thought some bad US job data would have knocked half a percent off the market, and caused a gradual decline until Jackson Hole, not this mess unfolding in Europe:

Italy prosecutors seize Moody's, S&P documents

I am not shorting the market, nor am I buying the market. I'm on the sidelines, I'm waiting to see what happens at the FOMC meeting next week and what Bernanke's reaction will be. There is always delay between the policy announcement and implementation. I also have no idea what effect a new round of QE will have in an environment like this. This is different than last summer, it's different than 2008. Sovereign debt crisis are much worse than bank crisis. I've had my finger on the pulse for the last 2 weeks and still can't figure out the scope of these issues. Why risk my hard earned money on this weeks casino?


----------



## blin10

leoc2 said:


> Hi folks,
> 
> I am an older foggy ...survived dot com bust and the 2008 financial bust ... losing not a penny (long story ... who knows maybe just luck). I went to cash this April (luck again?? don't know). I have learned from many here. *Please consider waiting to see what the wall street boys will do in September when they return from vacation.* Following their lead may be a good strategy. That is what I am doing now.


who do you think shorting this market right now? mom and pops from their basement ?


----------



## KaeJS

blin10 said:


> who do you think shorting this market right now? mom and pops from their basement ?




Now, blin10, here is a post of yours I agree with!

"You +1'd this publicly."


----------



## gibor365

blin10 said:


> who do you think shorting this market right now? mom and pops from their basement ?


Don't you think that the "big guys" artificially shorting the market to force QE3?


----------



## Abha

gibor said:


> Don't you think that the "big guys" artificially shorting the market to force QE3?


They sure are...via their super computers.

I don't think anyone realizes how much trading is actually done by algorithmic models and computerized trades.


----------



## larry81

Abha said:


> They sure are...via their super computers.
> 
> I don't think anyone realizes how much trading is actually done by algorithmic models and computerized trades.


according to various unverified figures... more than 3/4 of the trading is done by bots.

IMHO, HFT and algorithmic trading are more reasons why the small-guys have no chance in the market and why indexing is the best approach.


----------



## gibor365

Abha said:


> They sure are...via their super computers.
> 
> I don't think anyone realizes how much trading is actually done by algorithmic models and computerized trades.


That's right....thousands of programmers are writing those programs...


----------



## dogcom

I was listening to the guest on BNN today and he was saying he has to trade for his clients in order for them to make money. He says we are in a Japan scenario here but possibly not as bad but still you have to trade in this market. This is very hard for investors to grasp but that is what we are dealing with today.


----------



## larry81

gibor said:


> That's right....thousands of programmers are writing those programs...


That's false, the trading bot are in the hands of the big players (think Goldman Sachs), there a very limited number of EFT expert's.


----------



## larry81

More fun aheads folks ! Asian markets are down 4-5% 

http://www.washingtonpost.com/busin...-down-44-pct/2011/08/04/gIQA8wRIvI_story.html

http://moneywatch.bnet.com/investing/news/asia-stocks-sink-on-us-recession-fear-europe-debt/6272667/


----------



## Belguy

As is so often the case, the Asian markets are following up on what the North American markets have already done.

What makes me mad through all of this is the thought that public service workers have a gold-plated pension plan and just go on their merry way with no concerns about stock market returns. The rest of us are left with managing our own retirement monies and that means either accepting very low returns or taking some risk with the stock markets. That means that there are two classes of retirees. I guess that we had a choice back when we originally chose our respective career paths.

My retirement funds have just lost 10 percent of their value in two weeks while public service retirees have guaranteed and indexed pensions.

Jealousy will get me nowhere!!


----------



## ddkay

Have you seen Goldman Sach's trading profits last quarter? I think their computers blew up..

There really aren't many barriers to entry in HFT, you just need to have in depth knowledge of the markets, programming experience and some creativity.

https://beta.algodeal.com/ for example will evaluate your algorithms, and if they look good enough will put real capital behind them and share profits with you


----------



## Abha

ddkay said:


> Have you seen Goldman Sach's trading profits last quarter? I think their computers blew up..
> 
> There really aren't many barriers to entry in HFT, you just need to have in depth knowledge of the markets, programming experience and some creativity.
> 
> https://beta.algodeal.com/ for example will evaluate your algorithms, and if they look good enough will put real capital behind them and share profits with you


This may sound like a conspiracy theory but I think they are purposely tanking or hiding their profits because right now they are Enemy #1 in the eyes of most of the World.


----------



## ddkay

Research report from a hedge fund that called this crash on Valentine's Day, February 14 2011, using Shiller P/E as their metric: http://hussmanfunds.com/wmc/wmc110214.htm



> Last week, the S&P 500 Index ascended to a Shiller P/E in excess of 24 (this "cyclically-adjusted P/E" or CAPE represents the ratio of the S&P 500 to 10-year average earnings, adjusted for inflation). Prior to the mid-1990's market bubble, a multiple in excess of 24 for the CAPE was briefly seen only once, between August and early-October 1929. Of course, we observed richer multiples at the heights of the late-1990's bubble, when investors got ahead of themselves in response to the introduction of transformative technologies such as the internet. After a market slide of more than 50%, investors again pushed the Shiller multiple beyond 24 during the housing bubble and cash-out financing free-for-all that ended in the recent mortgage collapse.
> 
> And here we are again. This is not to say that we can rule out yet higher valuations, but with no transformative technologies driving the economy, little expansion in capital investment, and ongoing retrenchment in consumer balance sheets, I can't help but think that the "virtuous cycle" rhetoric of Ben Bernanke is an awfully thin gruel by comparison. We should not deserve to be called "investors" if we fail to recognize that valuations are richer today than at any point in history, save for the few months before the 1929 crash, and a bubble period that has been rewarded by zero total return for the S&P 500 since 2000. Indeed, the stock market has lagged the return on low-yielding Treasury bills since August 1998. I am not sure that even members of my own profession have learned anything from this.


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## Causalien

larry81 said:


> That's false, the trading bot are in the hands of the big players (think Goldman Sachs), there a very limited number of EFT expert's.


That is not true. Most of the trading bots in big firms are outdated algorithm that cannot adapt as fast. Imagine having to train hundreds of traders and quants on the usage each time you make an update.

There have been a lot of spillover and independent bot writers that have decided to go their own way. Sure they cannot compete against GS on the area their bots are targeting, but they can take over areas where the larger firm's bot cannot.


----------



## Abha

Causalien said:


> That is not true. Most of the trading bots in big firms are outdated algorithm that cannot adapt as fast. Imagine having to train hundreds of traders and quants on the usage each time you make an update.
> 
> There have been a lot of spillover and independent bot writers that have decided to go their own way. Sure they cannot compete against GS on the area their bots are targeting, but they can take over areas where the larger firm's bot cannot.


I have a rule in my trading manifesto that I will sell when I retire.

Rule #1203 Never Underestimate Goldman Sachs

These guys are everywhere, including all branches of governments around the World.


----------



## ddkay

^ Yeah what Causalien says is true, the arbitrage/latency trades are almost impossible for little guys but there's hundreds of other strategies one can take, especially in the world of derivatives.


----------



## ddkay

WTI crude 83... ES_F at 1188... Eurozone sovereign risk as measured by CDS surges to record highs. I think we all know where this is heading tomorrow, Europe is going to continue panicking, North America will gap down lower regardless of the jobs report, we're still in a mass deleveraging, forced liquidation period initiated yesterday. If we close below 1173, our market cycle officially changes to a bear market.


----------



## Causalien

What is interesting from a mathematical stand point. If you add the amount of QE2 to the stock market value at that time. We should never end up below that level since the net amount of money in the market should be more. 

So, where did the 600billion go?


----------



## Mockingbird

The market is big enough for every type of traders - big, small, papers, locals, proprietary, argos, quants, arbs, HFTs, hedggies, etc. The market will weed out those who cannot adapt. 

MB


----------



## Belguy

While I don't have the data to back me up, I heard this morning that the last similar big drop in the markets was in November 2008 but that it was followed by more or less additional steady declines until MARCH 2009 (including a particularly bad January) when the final bottom was reached.

If history repeats itself, we should reach the bottom of this market sometime around Christmas!!

The fact that the markets continue to drop today after yesterday's blood bath only serves to support this hypothesis.


----------



## HaroldCrump

Something is afoot...TSX is down nearly 450 pts as I write this.
It's doing worse than the DOW right now, which is in fact not doing too bad at all - only 100 pts down 
But the TSX behavior doesn't appear rational.
It's almost as if one of the big banks is about to go bust.


----------



## ddkay

Which one?


----------



## Yudansha

Is TD the weakest CDN bank? I highly doubt any of the CDN banks will drop. Why would they? CMHC is their safeguard.


----------



## larry81

Stocks are starting to rally. The surge coincides with headlines that the European Central Bank is ready to provide support to Italian and Spanish bonds if the respective countries commit to specific reforms

DOW +1% as i write this


----------



## HaroldCrump

DOW is up over 100 pts now within a matter of mins.
I have to say it - *WTF*


----------



## ddkay

Knowing Berlusconi, he's probably still in the hot tub, he'll just say the measures in place are good enough

RTRS-ECB READY TO BUY ITALIAN, SPANISH BONDS IF BERLUSCONI COMMITS TO BRING FORWARD SPECIFIC REFORMS -SOURCES
RTRS-ECB EXPECTS ITALY TO FAST-TRACK WELFARE REFORM, FISCAL RULE FOR BOND PURCHASES -SOURCES CLOSE TO TALKS
RTRS-EU LEADERS APPLYING INTENSIVE PRESSURE ON BERLUSCONI TO MAKE ANNOUNCEMENT -SOURCES


----------



## ddkay

According to CNBC: Italy, EU Have *Agreed* to Reform Measures; Italy Will Introduce Balanced Budget Rule in Constitution, Fiscal Consolidation Timetable


----------



## Yudansha

Up down +/-75 points, lots of people still pulling the sell trigger. I still think the market will end in red today unfortunately.


----------



## Jungle

This volitility is INSANE, like really? Giant, massive swings. This stock market is messed.


----------



## ddkay

It's completely based on the news cycle, it will probably sell off hard again into the close. Not taking any direct positions into the weekend.


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## ddkay

http://www.rai.tv/dl/RaiTV/diretta....ingBlock-233b8482-1cbc-4970-87d5-9d7604b26ddb

Berlusconi's on TV, he says "There's a speculative attack on Italy"... sounds fimiliar. Looks pretty tired too, maybe he was actually trying to fix something this time.

RTRS-ITALY'S BERLUSCONI THERE IS INTERNATIONAL SPECULATION AGAINST US WE MUST TRY TO COUNTER
RTRS-ITALY'S BERLUSCONI -WE WILL ACCELERATE MEASURES IN AUSTERITY PROGRAMME WITH AIM OF BALANCED BUDGET IN 2013
RTRS-ITALY'S BERLUSCONI -TREMONTI WILL GO TO PARLIAMENT TO OUTLINE WELFARE, TAX DECREE TO INTRODUCE MEASURES BY SEPTEMBER
RTRS-ITALY'S BERLUSCONI -SPOKE WITH SARKOZY ABOUT POSSIBILITY OF BRINGING FORWARD MEETING OF G7 FINANCE MINISTERS, TO BE HELD SOON
RTRS-ITALY'S TREMONTI -AIM TO FOCUS AUSTERITY PLAN ON 2012-2013 INSTEAD OF 2013-2014
RTRS-ITALY'S TREMONTI -WE ARE BRINGING FORWARD WHAT WE HAVE ALREADY DECIDED, NOT ANNOUNCING NEW MEASURES

Here come the protests...


----------



## Abha

The flush out is almost complete.

This happens everytime. The smart money scares everyone into liquidating their positions and they jump in at the bottom and ride the wave back up.

Congratulations to everyone who sat on their hands and waited this out.

We are nowhere near done in terms of wild intra-day swings but just remember...this week will seem like a bad dream in a few months.


----------



## Argonaut

Abha said:


> The flush out is almost complete.
> 
> This happens everytime. The smart money scares everyone into liquidating their positions and they jump in at the bottom and ride the wave back up.
> 
> Congratulations to everyone who sat on their hands and waited this out.
> 
> We are nowhere near done in terms of wild intra-day swings but just remember...this week will seem like a bad dream in a few months.


I'm not so sure you're right. The S&P 500 only has a daily high of 1218. Pretty pathetic given the titanic drop that has occurred in the last week. We are still trending downwards. Even as I speak the market is giving up some of its gains. Buying or selling for the long term right now would be quite rash.


----------



## Abha

Argonaut said:


> I'm not so sure you're right. The S&P 500 only has a daily high of 1218. Pretty pathetic given the titanic drop that has occurred in the last week. We are still trending downwards. Even as I speak the market is giving up some of its gains. Buying or selling for the long term right now would be quite rash.


Whatever is happening to the markets right now is just noise to me. 

I've been through this before. This isn't a market for beginners and I can handle double digit losses without breaking a sweat. We'll get a catalyst next week for sure, and if we dont...won't be the first time I'm wrong nor the last.

Like I have said a few times before, reference points on charts are irrelevant in these markets where you can swing 1 - 3% in either direction.


----------



## ddkay

H&S pattern forming on the S&P 5m daily... hopefully we don't get another Black Monday


----------



## HaroldCrump

HaroldCrump said:


> Something is afoot...TSX is down nearly 450 pts as I write this.


Popup message on my trading A/C :

_Please be advised that the TSX is currently experiencing an intermittent issue with Level 1 data which is also impacting the calculation of S&P/TSX Indices. 
Please use caution when placing TSX orders as pricing and execution may be incorrect._

I wonder if that nearly 500 pts. plunge on the TSX might be due to this data feed issue.

Brings back memories of the flash crash of May 2010.
Which BTW now appears to be like a warm sunny day at the park, with birds chirping and butterflies fluttering....


----------



## Jungle

Abha said:


> ...this week will seem like a bad dream in a few months.



Thank you Abha. THis is really tough to stomach right now, but just have to keep focused on the long term.


----------



## Belguy

This volatility could last for weeks!!

http://www.canadianbusiness.com/article/38332--stock-market-mayhem-may-last-weeks

Don't forget your seat belts!!


----------



## ddkay

S&P just downgraded the USA to AA+


----------



## larry81




----------



## ddkay

http://ftalphaville.ft.com/blog/2011/08/06/645176/sp-downgrades-the-usaaa-reuters/

Surprise - the US isn't exceptional. France is next...

I expect another week of hard selling before being overbought, then a slight bounce, then more selling etc until we're in a full blown recession/depression...


----------



## ddkay

Blame Europe, blame Canada, blame the speculators, blame the hedge fund managers with jets, etc, but don't you dare blame it on incompetent economists, strategists and politicians


----------



## ddkay

Here's what the correlation between the DOW, S&P500 and TSX60 looked like today


----------



## Belguy

I don't know if I heard this correctly today but something like 46 million American investors are now on food stamps--or something to that effect.


----------



## WillyA

Belguy said:


> I don't know if I heard this correctly today but something like 46 million American investors are now on food stamps--or something to that effect.


You did http://money.cnn.com/2011/08/04/pf/food_stamps_record_high/index.htm?iid=HP_River


----------



## ddkay

46 million Americans, not investors, I don't think investors would qualify for food stamps. Last year Congress had talked about cutting the program. America is a first world nation with a third world in their own backyard.

http://www.huffingtonpost.com/2011/08/03/food-stamp-usage-highest_n_917038.html


----------



## doitnow!

ddkay said:


> 46 million Americans, not investors, I don't think investors would qualify for food stamps. Last year Congress had talked about cutting the program. America is a first world nation with a third world in their own backyard.
> 
> http://www.huffingtonpost.com/2011/08/03/food-stamp-usage-highest_n_917038.html


s
How much more evidence is needed before one finally cuts losses, sells and buys back in a few months?


----------



## ddkay

http://www.federalreserve.gov/newsevents/press/bcreg/20110805a.htm

For immediate release August 5, 2011
Agencies Issue Guidance on Federal Debt

Earlier today, Standard & Poor's rating agency lowered the long-term rating of the U.S. government and federal agencies from AAA to AA+. With regard to this action, the federal banking agencies are providing the following guidance to banks, savings associations, credit unions, and bank and savings and loan holding companies (collectively, banking organizations).

For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change. The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board's Regulation W, will also be unaffected.


----------



## ddkay

I don't know when this crash is going to be over. I wouldn't be surprised to see it in freefall for the rest of this month, and next month, and the month after. QE won't do anything when people lose confidence and are continuously forced to liquidate. QE1 was started shortly after Lehman collapsed, and the market still continued to drop months after. Who knows how many other countries can fail over these issues - sovereign debt is at the core of the financial system and much more serious than a housing bubble. I think on a technical basis my indicators will trigger a short-term buy signal at the end of next week, but a lot more selling has to occur before that happens. Even then, I would rather sit on the sidelines for awhile than get whiplashed by the volatility.

P.S. on a purely technical basis this market has been oversold since December 2010, I have seen numerous people write about it, but couldn't pinpoint which issue would tip the scale. There have been too many to choose from in 2011 so far.


----------



## Four Pillars

Belguy said:


> 46 million American investors are now on food stamps


That pretty funny. 

For the record, I think the S&P downgrade (which should have it's own thread) is stupid. The US economy might not be firing on all cylinders, but it is still in decent shape. They also have a lot of capacity to raises taxes, if necessary to pay their obligations. 

This article illustrates how low the US taxes are: http://www.theglobeandmail.com/repo...-denial-over-taxes/article2114872/singlepage/


----------



## Abha

ddkay said:


> http://www.federalreserve.gov/newsevents/press/bcreg/20110805a.htm
> 
> For immediate release August 5, 2011
> Agencies Issue Guidance on Federal Debt
> 
> Earlier today, Standard & Poor's rating agency lowered the long-term rating of the U.S. government and federal agencies from AAA to AA+. With regard to this action, the federal banking agencies are providing the following guidance to banks, savings associations, credit unions, and bank and savings and loan holding companies (collectively, banking organizations).
> 
> For risk-based capital purposes, the risk weights for Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities will not change. The treatment of Treasury securities and other securities issued or guaranteed by the U.S. government, government agencies, and government-sponsored entities under other federal banking agency regulations, including, for example, the Federal Reserve Board's Regulation W, will also be unaffected.


In so many words....Nobody in the US Government cares about the S & P Downgrade....and neither should investors.

Do any of you really think the masses are going to flee US backed securities and go to Canada? England? India? China? 

I for one will be plowing more money into US Securities as these type of opportunities rarely present themselves.

We'll be fine, maybe some short term pain to continue the flush-out.


----------



## dogcom

I agree with four pillars. The US needs to do what Canada did in the 90's and that is raise taxes along with spending cuts and they have the capacity to do it. They just have to get the people to want to do something about it like the Canadian people did. So the question is can the American people get over themselves and do what needs to be done.


----------



## ddkay

Abha, Europe is going to be a disaster zone for awhile longer than the US. Fraudulent activities aside, in a contraction, China is seriously overextended. I've went over my theory before, if hell breaks loose, US-T's are still relatively the safest place on Earth to preserve your wealth, until there's a replacement. You may even have to pay Treasury if the yields go negative. Commodities are going to crash, the stock market is going to crash. 

The decision was not based on math, it was based on the demonstrably incompetent politics and fiasco on the deficit and debt ceiling these last few months. Now they have sealed the deal and proved to the world it can not responsibly issue risk-free debt and should not be entitled to reserve currency status.


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## Argonaut

Boy, am I glad that I made a small put bet as I was cashing out my big put bet today. Monday is going to be an absolute slaughterhouse. I can't believe some of you are buying. Why on earth would you buy something for $50 today when you know you could get it for $40 tomorrow?

My philosophy: Hold current long positions. Buy general market puts for insurance. Keep cashing them out and rolling them over until the market shows a legitimate rebound (i.e. golden cross). When that time comes there will be a lot of extra cash available to buy with the winnings from the puts.

I'm also sitting on a GLD call which I think will go to the moon, if the gold market reacts as it should.

Think about it. First downgrade in HISTORY. That's huge. Please, everyone, protect yourself.


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## humble_pie

are a few here flipping out already ?

when one thinks about it, there are really only 4 or 5 fairly wrought-up individuals posting regularly on this thread.

another small crowd of equally wrought-up acolytes, soothsayers, maidens & minions fluttering in & out.

and then there's the ninny title. Not the part about the market crash. The ninny part is the scared part.

we might have a market crash, although these are usually defined as major index losses in excess of 20% & all we have seen so far is 12-15%.

what we have to date is a correction. Like all corrections it's abrupt & violent. Like skiing powder in the selkirks after climbing for hours on skins. Six hours to ascend, 30 minutes to swoop down. Plus risk of avalanche or falling into crevasse.

non-skiers should stay down in the lodge, counting their GICs all warm & comfy in front of the fireplace.


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## dogcom

Just for the fun of guessing I would say we may be setting up for one of those turn around Tuesdays. Tuesday will start out falling hard and then turn around in huge volume as we set up for a relief rally starting on the backs of the shorts. Remember I said relief rally not buy and hold longer term rally, as I think we head back down after the rally which could last a number of weeks.


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## Four Pillars

Argonaut said:


> Monday is going to be an absolute slaughterhouse. I can't believe some of you are buying. Why on earth would you buy something for $50 today when you know you could get it for $40 tomorrow?


The problem is that nothing is for certain. You don't know that it will be bad on Monday - personally, I don't think the market will react very much to the downgrade.

Am I right? Are you right? I actually don't think right/wrong even applies here since we're both just guessing.

For the record, I hope you are right so I can make some more buys.


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## HaroldCrump

Perhaps the only person laughing through all of this is Senator John McCain.

I can picture him laying back on his hammock in this Texas ranch, sipping a martini and saying wistfully to himself - "_Gee, I wish I had won the presidential elections in 2009 and were President instead of that Obama dude._" - NOT!


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## Belguy

humble_pie said:


> are a few here flipping out already ?
> 
> when one thinks about it, there are really only 4 or 5 fairly wrought-up individuals posting regularly on this thread.
> 
> another small crowd of equally wrought-up acolytes, soothsayers, maidens & minions fluttering in & out.
> 
> and then there's the ninny title. Not the part about the market crash. The ninny part is the scared part.
> 
> ---For some of us, we grow too soon olde and too late schmart.


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## andrewf

McCain is from Arizona. Does he have a ranch in Texas or are you thinking of Bush?


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## Toronto.gal

Holy moly, this is not what I had expected to happen while on vacation. 

I hadn't heard anything new per se to have made the markets react this way, so I was totally perplexed. I know there is plenty of [global] economic trouble, but the market reaction this week was irrational. Hopefully you all took the time to review your portfolios while the US was playing political theatre the last few weeks.

Many people are 'scared' [I prefer the word concerned and nervous even] and justifiably so given all that has taken place from last year, hence the title of this thread, but it is also true that not much good comes out of being totally gripped by fear; panic & complete pessimism never helps.  

About the US downgrade, if it wasn't for the fact that we'll feel the consequence, I would say that the S&P's unilateral decision served them right for their drawn out discussions/debates/ fights over raising the debt ceiling and despite the 2 trillion error in the rating agengy's calculation, I think the downgrade had more to do with the lack of political leadership & circus we all witnessed than with the actual economic data, in fact, Mr. Chambers admitted as much to CNN's Anderson Cooper.

Don't let the current situation ruin your summer.


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## Cal

Four Pillars said:


> For the record, I think the S&P downgrade (which should have it's own thread) is stupid. The US economy might not be firing on all cylinders, but it is still in decent shape. They also have a lot of capacity to raises taxes, if necessary to pay their obligations. [/url]


And when the economy gets going, they will have to raise taxes. Unfortunately they have been a little too low for too long.

I don't get the downgrade either, these were the same guys who had AAA slapped all over the packaged up mortgages a few years ago, and how accurate was that.

The US will be fine, they can do all sorts of things to combat the debt, reduce spending, raise taxes, print money, cut back on foreign wars....


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## Abha

I don't know if there is a section for us to post articles but this is an excellent read about the relationship between Governments and the Markets.

http://www.newyorker.com/online/blogs/newsdesk/2011/08/markets-and-world-governments.html


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## HaroldCrump

andrewf said:


> McCain is from Arizona. Does he have a ranch in Texas or are you thinking of Bush?


You are right, the ranch is in Arizona.
The Verde Valley, to be exact (just looked it up).
Nevertheless, the rest of the image is true.
I was definetely thinking of John McCain since he ran against Obama, and not George Bush.


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## Causalien

Since computers are now 70% of the market volume ( as opposed to say 40% in 2008). The market will crash on Monday. The older algorithms in the bigger brokerages will weight US's AA+ rating in and promptly short the market to death before their operators unplug their power.


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## Abha

Don't forget about the hoardes of individual investors like jon snow waiting to deploy cash.

Despite High Frequency Trading we still do follow a supply vs demand model in the markets. 

The buyers will step in and keep the market from crashing. This is where Technical Analysis can help you.


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## zylon

Glad to see yer back *T-O* 

Your positive outlook is always appreciated


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## Causalien

As much as I'd like to see the market sustain its current level. The reality and the enormity of having to go through my codes line by line(and I can only guess the difficulties for the more established firms) and ponder whether or not I assumed AAA for US debt anywhere means that those money will not be deployed come Monday.

Even though TBTF entities are fine, evaluations will need to be done on anything linked to interest rates. People will have to start thinking about a rising rate environment. At least mortgage rates will start to rise now. 

What is interesting to watch in the near future though, is what will happen to S&P now that it has pissed on the hand that feeds it. Remember IMF's head who were bashing US? Yeah a prompt and immediate sexual harrassment lawsuit followed to make him resign. The S&P may have committed seppuku here.


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## Jon_Snow

I got spooked back in March and sold my TD e-series holdings (80k). Then promptly watched the market march steadily upward. Pretty much sold me on the argument that market timing is a fools game. Yet here I sit trying to do the same damn thing again. I have always been ultra conservative with my finances, yet this one time my desire to hit a home run (or at least a triple) is overwhelming. It's as if I am looking for some reward for my LBYM lifestyle.

I'm just so glad I found this site a few years ago - it has to be one of the best resources a Canadian newbie investor can have.


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## Abha

http://i.imgur.com/Amagy.jpg


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## humble_pie

finally some balanced voices here. What was concerning me is that the doom criers were spooking newer investors here in this forum & some were talking openly about selling.

same thing happened in 2008. Some smaller investors who panicked & sold at the lows never recovered. All this was very tragic in addition to being quite unnecessary imho.

it's not enough for abha to try to boost this thread with cheerleading alone. The purple anguish icon posters could maybe think twice before posting up hysterics.

to worried new investors: now is the time to learn some valuable lessons. How well do you really understand your capacity to tolerate risk. Might the leavening yeast of greater bond or GIC allocation help to defuse circumstances like these next time they happen - because market crashes are going to happen again & again.

and can you resolve not to buy anything new until the bottom of the trough is clearly in. Which it is not yet imho. A rough rule for restarting buying after a meltdown is when markets have ascended on significant volume at least 20% from their lows. In the meantime it could be a help to ignore the fast-shooters bragging about their killer trades. I for one am happy for them, but not inclined to follow suit. Usually in market storms i take shelter, looking out only for fences to be repaired, escaped barnyard animals, hungry children & other emergencies.

(aside to abha if he happens to pass by) hordes in the sense you are using the word is spelled h.o.r.d.e.s, ie a horde of rampaging mongols on horseback followed genghis khan across northern europe.

hoard is a noun or a verb meaning a large & usually guarded cache of items, or saving a large cache of items rather relentlessly. Like our friend in the gulf islands hoarding his cash & waiting for The Opportunity.

but alas for your theory, i don't think a few hoarders cracking out the loot on monday are going to save the market ... not even if there are hordes of them.


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## ddkay

CME's E-mini S&P Futures circuit breaker should kick in at 5% of the last closing price, so the initial worst it can get Sunday night from 1200 is 1140: http://www.cmegroup.com/cn-t/file/equity-index-PriceLimitFAQ.pdf

Also another interesting piece from Seeking Alpha: The effects of QE2 through the lens of QE1



> Several people have already weighed in with their opinion on what QE2 would mean for the markets. David Tepper, president & founder of Appaloosa Management, says there are only two scenarios (h/t pragcap.com):
> 
> The economy improves and stocks rise; or
> The economy will decline and the Fed will induce a rally in stocks via QE.
> According to David Rosenberg, chief economist at Gluskin Sheff, Tepper is forgetting a third scenario in where,
> 
> “the economy weakens to such an extent that the Fed does indeed re-engage in QE, but that it does not work. So the “E” goes down and the P/E multiple does not expand.”
> 
> Lower interest rates mean lower discount rates in free cash flow and dividend discount models. Using the current Shiller P/E10 of 21 (P = 1,147.10 and E = 54.7) and the formula for justified P/E, holding all variable constant save for r, [(1 - b) x (1 + g)]/(r – g)], we find that a .5% drop in the discount rate would result in an expansion of the multiple to 26, a 25% increase. If you are less optimistic about the effect of QE2 on lowering rates, even a .25% decrease in rates would imply a multiple of 23, or an 11% increase.


And there's a nifty chart of what the long-term real P/E on the S&P looks like compared to long-term interest rates on Wikipedia's entry on P/E ratios http://en.wikipedia.org/wiki/P/E_ratio


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## CanadianCapitalist

I urge new investors to heed humble_pie's sage advice. I'm very nervous when I hear comments such as "I can't take this anymore. Get me out already!" and we're not even in bear market territory yet (and I have no idea if things will get better or worse from here. Recall that last summer stocks lost about 15% only to shoot up another 33%. And in 2008, stocks lost 15% and another 15% and another 15% and then one more 15%). If you can't stand the heat of a 20% down from the recent peak (which, on average, occurs every 3-1/2 years), how are you going to sail through 50% down markets (though rare, every investor should *assume* that they will encounter such a market at some unknown point in the future before committing a single penny in the stock market).

What's even more disconcerting is that it is not that long ago that we did experience a 50% down market. How can investors forget so soon that the stock market is not a gentle stream that you can leisurely boat in? To survive tough times, you need a big cushion in "safe" assets. Good quality bonds, GICs and certainly cash... This is not the best time to get that cushion but if the alternative is broken bones, you may want to go shopping even if you are paying through the nose for it now (bonds are higher, stocks are a lot lower). And make sure you are getting one that is thicker than you think you'll need because it is only when stocks fall and fall and fall that you know how strong a stomach you have.

I have no idea if this is a good buying opportunity. Stock valuations are reasonable but they could get even more attractive. If I were to take a guess, I'd say the knives are still falling, not clattering on the floor.


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## fatcat

good posts cc and pie

i am a novice investor and am slowly learning how to build the portfolio i want

i am guiding myself by one basic principle - never invest in such a way that you can't sleep well at night 

always invest within your comfort zone

there are a lot of people out there laddering gic's, i say, good on them if that's what gives them a good night sleep


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## donald

Good reminder of how the nature of the markets are,im a newer investor(new as in i left the world of mutual funds and went self-directed)

Im a firm believer that stock ownership over a long time horizon is one of the best ways to grow wealth,infact imo its almost a "must".

I dove in the markets with a significant amount in the last few months,and im expierencing what it feels like to have your hard earned money on the line,id be lying if i said im as cool as a cucumber right now but most def staying the course.

I try not to think of the dollar amts,i think of the shares,and i remind myself of the fact that short term its like a voting machine.

This market seems abit different to me thou(2009-present)maybe it just feels that way because im invested and closely follow,i dont have the proper knoweledge or expierence to know fully,but one must start somewhere,learn somehow,every investor has to start,most of us are not as calloused and seasoned investers like humble,cc,abha....like when i sarted my career when i was 18 my boss said to me:my job is to get rid of your boy blood....It can be alot to take in.


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## gibor365

Yeap, probably I overestimated my risk tolerance , but the question is what to do now? I'm already about 10% down YTD and I don't see any signs that market are gonna recover anytime soon....

Buy some short ETFs as a hedge?


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## donald

You stay the course,and remove panic and emotions from it.Atleast thats what im doing,going in i had and have a longterm objective,and for me none of it involves:market timing,trading,speculating this and that,swiching back and forth to bonds,cash ect,otherwise i dont belong in the market.


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## Abha

gibor said:


> Yeap, probably I overestimated my risk tolerance , but the question is what to do now? I'm already about 10% down YTD and I don't see any signs that market are gonna recover anytime soon....
> 
> Buy some short ETFs as a hedge?


If you're sweating bullets right now, the last thing I would recommend is jumping into the short ETF game.

If you want to try out this strategy I recommend doing so with no more than 50 - 100 shares. If you think the market swings are volatile just wait until you try out these levered ETF's.


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## gibor365

Abha said:


> If you're sweating bullets right now, the last thing I would recommend is jumping into the short ETF game.
> 
> If you want to try out this strategy I recommend doing so with no more than 50 - 100 shares. If you think the market swings are volatile just wait until you try out these levered ETF's.


I think it's better to talk anot shares, but $ value...
HIX is $11.62 and for example FAZ is $62.37....


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## Belguy

Just to illustrate how far the markets could drop, my index portfolio has dropped approximately 5 per cent over the past two weeks. Peak to trough back in 2008, basically the identical portfolio dropped a total of 43.7%!!!

We could have a long way to go down yet!!!!!

The older that I get, the harder it is to be a buy-and-hold investor!!!

However, if you are going to invest in the markets, you have to be able to endure those 50 percent drops that come along from time to time (although another one following so quickly after the 2008 drop is a bit much!!).


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## doitnow!

CanadianCapitalist said:


> I urge new investors to heed humble_pie's sage advice. I'm very nervous when I hear comments such as "I can't take this anymore. Get me out already!" and we're not even in bear market territory yet (and I have no idea if things will get better or worse from here. Recall that last summer stocks lost about 15% only to shoot up another 33%. And in 2008, stocks lost 15% and another 15% and another 15% and then one more 15%). If you can't stand the heat of a 20% down from the recent peak (which, on average, occurs every 3-1/2 years), how are you going to sail through 50% down markets (though rare, every investor should *assume* that they will encounter such a market at some unknown point in the future before committing a single penny in the stock market).
> 
> What's even more disconcerting is that it is not that long ago that we did experience a 50% down market. How can investors forget so soon that the stock market is not a gentle stream that you can leisurely boat in? To survive tough times, you need a big cushion in "safe" assets. Good quality bonds, GICs and certainly cash... This is not the best time to get that cushion but if the alternative is broken bones, you may want to go shopping even if you are paying through the nose for it now (bonds are higher, stocks are a lot lower). And make sure you are getting one that is thicker than you think you'll need because it is only when stocks fall and fall and fall that you know how strong a stomach you have.
> 
> I have no idea if this is a good buying opportunity. Stock valuations are reasonable but they could get even more attractive. If I were to take a guess, I'd say the knives are still falling, not clattering on the floor.


What I would like to know from experienced couch potato investors is the following: if the market is (like many of you believe) going to drop significantly, why not sell and wait till things cool off on the sidelines with cash in hand.

Before you dismiss this as the ramblings of a scared novice investor note that I am not panicking. I knew what I was getting into and although it has been a sometimes uncomfortable ride I’m sold on equity investing for the long haul good (or bad). I am 40% invested in bonds, the rest broadly invested in Canada, US and World, plus I have cash available to buy when/if a few solid dividend stocks become available. I've only been a DYI since the end of June and to date my losses are lower than most, about 5%. I do not think the markets will go to hell and although it may take months to recover, they will eventually, plus it is money I don't intend to touch for 10 years. I am also invested in rental real estate and I can breathe easy knowing that people will need a place to live for the foreseeable future.

I am not sure why CPI should feel like they must go down with the ship. What's wrong with selling and then buying if you think that the market will tank and then rebound IF you are so sure we are in for a significant dip? Yes, it is impossible to know when the markets have reached rock bottom but why wouldn’t selling even somewhere in the bottom range be an option worth considering? For example, let's say one was able to sell now with a 5% loss Monday morning and then buy back when the market drops 10%, 15% or even 30% a week or a month later.

If one miscalculated and the markets remain unchanged on Monday (no drop, an unlikely event given that many of you are predicting doom and gloom) the worst case scenario is that one would take a 5% hit, a loss that would have to be weighed against a possible 10% - 15% - 30% drop.

I may be way off base here and there are likely many good arguments for not selling and these may be naive hypothetical examples but from my novice perspective, the couch potato philosophy of buy and hold no matter the circumstances doesn't seem to be a convincing argument but maybe that's because I haven't been around long enough.

I agree that these decisions should not be fear driven but instead based on knowledge and understanding. I know I have a lot to learn but I am glad to have found this forum.


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## Belguy

Study after study has shown that market timing is basically a mug's game and that is why I just stay invested and 'enjoy' the entire rollercoaster ride.

This is not practiced by all investors many of which are basically day traders always buying and selling and trying to pick the right times to do both.

Good luck to them over their investment lifetimes!!


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## doitnow!

Belguy said:


> Study after study has shown that market timing is basically a mug's game and that is why I just stay invested and 'enjoy' the entire rollercoaster ride.
> 
> This is not practiced by all investors many of which are basically day traders always buying and selling and trying to pick the right times to do both.
> 
> Good luck to them over their investment lifetimes!!


I understand but this is not what I am addressing in my post. I agree that it is a "mug's game" and I am not suggesting that one should trade any more than absolutely necessary but why not only in exceptional circumstances (a major dip - what many of you believe will happen on Monday).


----------



## zylon

doitnow! said:


> I may be way off base here and there are likely many good arguments for not selling and these may be naive hypothetical examples but from my novice perspective, the couch potato philosophy of buy and hold no matter the circumstances doesn't seem to be a convincing argument but maybe that's because I haven't been around long enough.


The great irony of the Couch Potato strategy is that precious few investors in said strategy actually follow the Couch Potato Philosophy.


> Passive Couch Potato investors don’t try to beat the market, they simply track stock and bond indexes at low cost. Our Couch Potato strategy beats 80% of the money managed by professionals over the long-term* and requires only 15 minutes of your time each year.* ~source (my bold)


It's clearly evident that CP investors on this forum are kidding no one but themselves as to what they are, as they obviously spend vastly more time following the markets than I would ever dream of doing.

If one is going to spend hour upon hours daily, studying the market, why not just buy a few companies and put the time to some use?


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## doitnow!

zylon said:


> The great irony of the Couch Potato strategy is that precious few investors in said strategy actually follow the Couch Potato Philosophy.
> 
> It's clearly evident that CP investors on this forum are kidding no one but themselves as to what they are, as they obviously spend vastly more time following the markets than I would ever dream of doing.
> 
> If one is going to spend hour upon hours daily, studying the market, why not just buy a few companies and put the time to some use?


I think I am coming around to that conclusion. My plan is to do both, couch potato and dividend investing.


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## donald

It does sort of defy logic,but the stock market isnt always logical.Ive read buy and hold is "dead"but how else is one to play the game?I would think jumping in and out has to be more risky?


They way i look @ it,unless the world falls into armageddon,i have to believe quality companies like for instance-bell,cnr,mcd,xom,cvx,ko for example are going to be way up from my 2011 buys when i want to cash out and tranfer in say 2035?History is on that side of the coin,maybe im licking my wounds in 2013,but its got to be damn near impossible to be licking them for yrs and yrs.

I think most def you will feel abit of pain from time to time,but unless you know full well what your doing,trying different stragies of timing you could get even more hurt,thats my opinion,but that might just be my personality and the way i view things.


----------



## blin10

doitnow! said:


> I understand but this is not what I am addressing in my post. I agree that it is a "mug's game" and I am not suggesting that one should trade any more than absolutely necessary but why not only in exceptional circumstances (a major dip - what many of you believe will happen on Monday).


many believe it will happen monday because of a downgrade AFTER the markets closed on friday, how exactly are you suppose to sell ? and on your previous question why don't you just sell and buy lower, how exactly do you know it'll keep going down? some guy wrote in another thread how he sold 80k worth of stuff expecting to pick it up lower back in march and instead it started going higher


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## ddkay

Jon Snow is sitting pretty right now. A lot of asset managers (18%) were exiting the market and going all cash or heavy cash / all liquid this spring.

Stuff like this started popping up: Covepoints new fund bets against the West | AR Absolute Return

Warren Buffet is late to the party again, which is why he's pumping up the market.

If you want to know what the stock market is going to do, follow news on the credit/bond market. European credit spreads were getting shot in the back for weeks on end going into August. I even made a thread here about Italy at the beginning of July, where one of the comments left on the story was, "Look at the dark pool exchanges at Goldman Sachs and you will see the biggest Italian banks having the most volume. Simon Johnson is dead right Italy is next and the insiders already have their positions ready".



> Jim Young: And there is no such thing as a no sale call. A sale is made on every call you make. Either you sell the client some stock or he sells you a reason he can't. Either way a sale is made, the only question is who is gonna close? You or him? Now be relentless, that's it, I'm done.


----------



## doitnow!

donald said:


> It does sort of defy logic,but the stock market isnt always logical.Ive read buy and hold is "dead"but how else is one to play the game?I would think jumping in and out has to be more risky?
> 
> 
> They way i look @ it,unless the world falls into armageddon,i have to believe quality companies like for instance-bell,cnr,mcd,xom,cvx,ko for example are going to be way up from my 2011 buys when i want to cash out and tranfer in say 2035?History is on that side of the coin,maybe im licking my wounds in 2013,but its got to be damn near impossible to be licking them for yrs and yrs.
> 
> I think most def you will feel abit of pain from time to time,but unless you know full well what your doing,trying different stragies of timing you could get even more hurt,thats my opinion,but that might just be my personality and the way i view things.


Sounds like you are not a couch potato investor, your losses may not reflect the index. But if you were hearing that one of your companies was going to crash by 30% the next day and if (and this is the big IF) you believed it to be true or even very likely, why then wouldn't you sell if selling cost you 5%.


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## fatcat

> Yeap, probably I overestimated my risk tolerance , but the question is what to do now? I'm already about 10% down YTD and I don't see any signs that market are gonna recover anytime soon....
> 
> Buy some short ETFs as a hedge?


 gibor, you might want to listen to don vialloux being interviewed on michael campbells moneytalk program

he runs the horizons hac etf fund and he seems convinced that this drop follows a seasonal pattern and that pattern shows a rebound is definitely in the cards ... he did have some interesting numbers

you can get show by going to: cknw.com and then select "on air" and then "audio vault" and then choose saturday august 6 at 9AM .. this will play in windows medica center

i thought it was worth the listen ... bottom line, look for a pop back that is significant


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## Four Pillars

doitnow! said:


> What I would like to know from experienced couch potato investors is the following: if the market is (like many of you believe) going to drop significantly, why not sell and wait till things cool off on the sidelines with cash in hand.


Because we don't know if it will drop Monday. I'm of the opinion that it won't, but it doesn't matter what I think. I'm not going to place a bet either way based on my opinion.

Truth be told, if I was confident I could predict the market - I would make moves like you describe. However, I've been investing long enough (18 years) to know that I just can't predict the markets. That doesn't mean I don't still try (for fun and entertainment), but it doesn't change my investment philosophy.

A good exercise is to write out what you think will happen with the market over the next little while (or on Monday) and then check back after the time period is over (ie end of day on Monday or 3 months from now or whenever). See how accurate you were. Keep doing it - if you are right significantly more than 50% of the time, then you can probably make money from your predictions.


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## Abha

Four Pillars said:


> Because we don't know if it will drop Monday. I'm of the opinion that it won't, but it doesn't matter what I think. I'm not going to place a bet either way based on my opinion.
> 
> Truth be told, if I was confident I could predict the market - I would make moves like you describe. However, I've been investing long enough (18 years) to know that I just can't predict the markets. That doesn't mean I don't still try (for fun and entertainment), but it doesn't change my investment philosophy.
> 
> A good exercise is to write out what you think will happen with the market over the next little while (or on Monday) and then check back after the time period is over (ie end of day on Monday or 3 months from now or whenever). See how accurate you were. Keep doing it - if you are right significantly more than 50% of the time, then you can probably make money from your predictions.


I do this. I write down all my thoughts, even stocks that I want to buy but don't. It comes in really handy to look back at your thought processes at certain time.

I'll give you an example. I wanted to buy Toyota and Washington Mutual a few years ago and for whatever reason I didn't.

Then Toyota went through almost every possible nightmare (recalls, accelerator problems, quality control, earthquakes etc.) and Washington Mutual is no longer in existence.

I was watching Washington Mutual because management had an excellent reputation and it seemed like a great value play. Turns out I was wrong on both counts and it served me well when I began to analyze financials again in 2008 - 2009.

Instead I put my money in Ford and Goldman Sachs both of which aren't looking so hot right now. 

It is a very valuable tool for traders to see their thought processes at certain moments and to analyze the trades when things don't work out.


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## Four Pillars

I should add - another useful exercise is to track your performance and compare to a passive equivalent (ie XIC). See how much value you are adding (or not).


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## Belguy

One positive thing about times like this is that it causes investors to reconsider their asset allocation targets and their risk tolerance. It's easy to be overly aggressive when times are good but it is times such as these that could provide you with more realistic personal targets.

For example, partly because of my age and the ongoing volatility of the stock market, I am going to change my target allocation from 60 percent equities/40 percent fixed income to a 50/50 allocation at an appropriate time in the future.

On the other hand, if I were much younger, I would likely leave it where it is.


----------



## doitnow!

Four Pillars said:


> Because we don't know if it will drop Monday. I'm of the opinion that it won't, but it doesn't matter what I think. I'm not going to place a bet either way based on my opinion.
> 
> Truth be told, if I was confident I could predict the market - I would make moves like you describe. However, I've been investing long enough (18 years) to know that I just can't predict the markets. That doesn't mean I don't still try (for fun and entertainment), but it doesn't change my investment philosophy.
> 
> A good exercise is to write out what you think will happen with the market over the next little while (or on Monday) and then check back after the time period is over (ie end of day on Monday or 3 months from now or whenever). See how accurate you were. Keep doing it - if you are right significantly more than 50% of the time, then you can probably make money from your predictions.


I could see that the writing was on the wall on Monday the 1st, news of the bickering was a daily if not an hourly occurrence, there were repeated threats from the rating agencies. I thought about selling, even put a day stop, but decided to stay true to the buy and hold philosophy. 

Now that I think back, what would have been the worst case scenario had I sold? The only one I think of is that I would have potentially missed out on a market upswing. A very unlikely scenario which further supports my belief that it would have it was a risk worth taking in that there was much to gain and little to lose (only 4x9=36 for 4 sells). 

Guess there is a window of opportunity available to get out, cause after a while it's tough to contemplate turning significant paper losses to real losses.

My point it that even couch potatoes may be better off to make the *occasional* trade when things are looking a little gloomy and before they get right down uncomfortable.

I will keep track of my rationale and hunches, see how they pan out, so far so good.


----------



## Belguy

Sometime in the future, we will start to read posts, in this forum, from those who bemoan the fact that they sold at the wrong time in a panic and then waited too long to get back in.

Often, human behaviour in general, and the investor's own personal behaviour is what gets them in trouble.

If you've identified your risk tolerance properly in the first place and carefully constructed your portfolio according to an appropriate (for you) asset allocation, then I believe that a buy-and-hold approach can work well for you over the long term.

Just never find yourself where you have to sell something that is down in value thereby locking in your loss. That money should not have been in the stock market in the first place.

In other words, if you don't have to sell you can rest assured that your losses are only paper losses and that, with time, what goes down will, in the main, go back up if you have chosen quality investments in the first place.

Have a good sleep!!!


----------



## Argonaut

Sell in May and go away.


----------



## KaeJS

humble_pie said:


> but alas for your theory, i don't think a few hoarders cracking out the loot on monday are going to save the market ... not even if there are hordes of them.


I laughed so hard at the above statement, I thought my lungs were going to collapse. Hilarious. 



Argonaut said:


> Sell in May and go away.


Always remember buy again in September.


----------



## Homerhomer

Went to the cottage Wednesday morning and just came back, did I miss anything exciting 

Monday may be quite interesting, since I have no clue if we are due for a rebound or have another 50% down to go I may add couple of dividend payers, but deep inside I would be happy to see the markets go down more since I find many stocks still not cheap enough.

It will be really interesting to see how the market reacts to US downgrade, my bet is on slaughter but who knows.


----------



## Argonaut

I'm targeting S&P 500 falling to 1100 in the short term. Would love to see some crazy stuff, like Coca-Cola yielding 5%. There will be some bargains in the future, and there will be plenty of time to get them. A balloon takes longer to inflate than it does to pop. Look at the slow and steady gains of QE2, and how they will be wiped out in a matter of days.

I'm a bit worried about the TSX for all you index investors out there. Unfortunately you have been exposed to junk like YLO and RIM and will continue to be. Since when does a penny stock belong in the TSX 60? Update please!


----------



## Abha

Argonaut said:


> I'm targeting S&P 500 falling to 1100 in the short term. Would love to see some crazy stuff, like Coca-Cola yielding 5%. There will be some bargains in the future, and there will be plenty of time to get them. A balloon takes longer to inflate than it does to pop. Look at the slow and steady gains of QE2, and how they will be wiped out in a matter of days.
> 
> I'm a bit worried about the TSX for all you index investors out there. Unfortunately you have been exposed to junk like YLO and RIM and will continue to be. Since when does a penny stock belong in the TSX 60? Update please!


I'm going to backup the truck on Yellow Media when it hits 0.50 cents.

I missed the opportunity to buy bankruptcy plays in GM, Sirius and Barnes and Nobles....not this time....I'm sure there's somebody out there who likes the properties that Yellow Media holds.


----------



## SixesAndSevens

Argonaut said:


> I'm a bit worried about the TSX for all you index investors out there. Unfortunately you have been exposed to junk like YLO and RIM and will continue to be.


so the index funds should only contain winning stocks and not the losers? why the heck?
as an index investor this is the exact risk they sign up for,
you gotta take the garbage with the gold, the chaff with the grain, you get my point.
don't wish to spend the time & effort required to pick stock, well the you have to settle for such losing stocks in your portfolio.

the indexes are set for yoyo performance for the next many many years.


----------



## doitnow!

Argonaut said:


> I'm targeting S&P 500 falling to 1100 in the short term. Would love to see some crazy stuff, like Coca-Cola yielding 5%. There will be some bargains in the future, and there will be plenty of time to get them. A balloon takes longer to inflate than it does to pop. Look at the slow and steady gains of QE2, and how they will be wiped out in a matter of days.
> 
> I'm a bit worried about the TSX for all you index investors out there. Unfortunately you have been exposed to junk like YLO and RIM and will continue to be. Since when does a penny stock belong in the TSX 60? Update please!


Thanks for the reminder, I am concerned about my XIC, it has dipped lower in the last couple of days than either US & World broad etf's.


----------



## Abha

doitnow! said:


> Thanks for the reminder, I am concerned about my XIC, it has dipped lower in the last couple of days than either US & World broad etf's.


If it's any comfort, Blackberry's new lineup does look promising and Potash won't be down for too long given the global needs and it being an agricultural play.

Plus, the gold companies have to catch up to the price of gold at some point, unless they hedged.


----------



## KaeJS

Abha said:


> If it's any comfort, Blackberry's new lineup does look promising and Potash won't be down for too long given the global needs and it being an agricultural play.
> 
> Plus, the gold companies have to catch up to the price of gold at some point, unless they hedged.


BlackBerry, AKA RIM, is a dead company. I don't think they can ever come back. They may hang around and get some pity for a few years, but then they are out.

Potash looks good, though.


----------



## gibor365

fatcat said:


> gibor, you might want to listen to don vialloux being interviewed on michael campbells moneytalk program
> 
> he runs the horizons hac etf fund and he seems convinced that this drop follows a seasonal pattern and that pattern shows a rebound is definitely in the cards ... he did have some interesting numbers


I'll try to find it....btw what do you think about HAC? performing not too bad in those tough times...


----------



## Abha

KaeJS said:


> BlackBerry, AKA RIM, is a dead company. I don't think they can ever come back. They may hang around and get some pity for a few years, but then they are out.
> 
> Potash looks good, though.


Being long Apple and Google I completely agree with you. 

That being said, their lineup is a move in the right direction and they are still have a large enough customer base to at hold them over for the next couple of quarters.


----------



## gibor365

gibor said:


> I'll try to find it....btw what do you think about HAC? performing not too bad in those tough times...


listening now...pretty interesting.. he said that this year some agency that follows hurricanes , predicts much high number of major hurricanes in States and gas should soar....


----------



## donald

What sector do you guys like for the rebound?The industrials?oil?consumers?


----------



## Argonaut

Oil would be a good bet, the demand will never cease. Exxon dropping into the 60's would be a nice gift. If you're in a bit early, there's a dividend to sit on. If you're in a bit late, there will still be more upside. If you manage to catch Exxon or Chevron at the right time it would be an easy 20% gain. I made this very trade last year.


----------



## ddkay

For serious long term holds, definitely the blue chip consumer staples:

Proctor & Gamble - PG
Kimberly-Clark - KMB (long kleenex)
PepsiCo - KO
General Mills - GIS

Not a big fan of putting money in the resource commodities


----------



## Abha

ddkay said:


> For serious long term holds, definitely the blue chip consumer staples:
> 
> Proctor & Gamble - PG
> Kimberly-Clark - KMB (long kleenex)
> PepsiCo - KO
> General Mills - GIS
> 
> Not a big fan of putting money in the resource commodities


I've been adding Pepsi & Proctor & Gamble to some of the portfolios I look after


----------



## humble_pie

very appealing long-term call spreads appearing in PG, F, POT, even CCJ if one can believe uranium. These 2-year option formations are designed to deliver income as capital gains while avoiding US dividends.

i have good luck with these, so i don't hold actual large cap US stocks in non-registered.


----------



## ddkay

This morning's market action was mixed. The good news is Saudi Arabia's Tadawul All Share Index closed up 0.08%. The bad news is Israel's Tel Aviv Composite Index closed down -7.31%


----------



## Belguy

XSP for a long term buy and hold.


----------



## Jon_Snow

Yeah, XSP has made the cut on my shopping list.

I'm spending the morning screening stocks and funds that will HOPEFULLY become even cheaper early this week... I've transferred about 120k into my TDW account and I am ready to go. I went to my bank yesterday about paying a penalty to get a 100k out of a GIC but was convinced to leave it in. I've never felt this GREEDY.


----------



## KaeJS

Jon_Snow said:


> Yeah, XSP has made the cut on my shopping list.
> 
> I'm spending the morning screening stocks and funds that will HOPEFULLY become even cheaper early this week... I've transferred about 120k into my TDW account and I am ready to go. I went to my bank yesterday about paying a penalty to get a 100k out of a GIC but was convinced to leave it in. I've never felt this GREEDY.


120k in TDW and 100k in a GIC? 

I'm jelly.


----------



## fatcat

> listening now...pretty interesting.. he said that this year some agency that follows hurricanes , predicts much high number of major hurricanes in States and gas should soar


.... yes, i remember that (he mentioned bmo's etf ZJN as a possible play), he also predicts a big snap-back from this correction to occur fairly soon ... will trim a little fat if that happens

i think seasonal investing sounds very interesting but probably requires learning a whole new language



> For serious long term holds, definitely the blue chip consumer staples:
> 
> Proctor & Gamble - PG
> Kimberly-Clark - KMB (long kleenex)
> PepsiCo - KO
> General Mills - GIS
> 
> Not a big fan of putting money in the resource commodities


 what if predictions of rising food costs continue to play out ? ... these companies will have their margins squeezed pretty tight .. they are already doing some fancy stuff with smaller packages ... wal-mart has had 8 down quarters in a row ... i just not so sure they are the dependables that you think they might be but i do get the point - people gotta eat and balies need diapers etc


----------



## KaeJS

Argonaut said:


> Oil would be a good bet, the demand will never cease. Exxon dropping into the 60's would be a nice gift. I made this very trade last year.


Very nice trade.

I find it hard to believe that XOM will ever go below $65 again. I think those days are over. But you are right, would definitely be sweet to get some below $70.


----------



## Abha

fatcat said:


> .... yes, i remember that (he mentioned bmo's etf ZJN as a possible play), he also predicts a big snap-back from this correction to occur fairly soon ... will trim a little fat if that happens
> 
> i think seasonal investing sounds very interesting but probably requires learning a whole new language
> 
> what if predictions of rising food costs continue to play out ? ... these companies will have their margins squeezed pretty tight .. they are already doing some fancy stuff with smaller packages ... wal-mart has had 8 down quarters in a row ... i just not so sure they are the dependables that you think they might be but i do get the point - people gotta eat and balies need diapers etc


These are not companies you want to be in for a few quarters but rather many years and quite possibly decades.


----------



## Jon_Snow

KaeJS said:


> 120k in TDW and 100k in a GIC?
> 
> I'm jelly.


Hah! And I was equally "jelly" when I sold my investments in March and watched the lot of 'ya making nice gains while I sat in cash making 1.25%. 

Now its my turn.  (hopefully)

I simply can't wait for tomorrow. It's going to be fascinating.


----------



## ddkay

The ECB bond purchase announcement had very little detail, and the purchase amount is too little, I don't think the market will buy it


----------



## clovis8

One the plus side all signs point to mortgage rates heading even lower just in time for me to buy my first place.


----------



## ddkay

On the plus side gas is cheaper and Switzerland is losing jobs to the franc, maybe they'll come here


----------



## doitnow!

Jon_Snow said:


> Hah! And I was equally "jelly" when I sold my investments in March and watched the lot of 'ya making nice gains while I sat in cash making 1.25%.
> 
> Now its my turn.  (hopefully)
> 
> I simply can't wait for tomorrow. It's going to be fascinating.


It may be "fascinating" for you but it will be downright anxiety provoking for many folks in or entering retirement age for example and I suspect that they form a fairly healthy percentage on this forum. Even those who have carefully calculated their risk tolerance and invested accordingly are likely worried (whether or not they wish to admit it) about what the morning will bring. 

What keeps us sleeping well during these turbulent times is our real estate income investments (real bricks) and our jobs, both of which thankfully give us the much needed stability to mitigate this insanity.


----------



## Addy

Maybe so doitnow, but I for one hope the market tanks so I can go on a spending spree.


----------



## Jon_Snow

Thanks for the admonishment doitnow. 

But I still think tomorrow is going to be fascinating.


----------



## donald

I like all 3 sectors after this emotional mess gets sorted out,you would think alot of investors will return to oil again,xom and cvx for there qualities.

I still think industrials that are growing outside the us are positioned well,with the us dollar falling(likely for some time)like a cummins,cat,deere,when there sales are converted back there profits rise.

And the big consumers like ko,and pg,for there numerous qualities.

Is the falling us dollar=big profits for the multi-nationals?is that the right thinking?in this environment?

Anybody have any thoughts on what looks good,for a declining dollar?


----------



## MikeT

Declining dollar means you are paying your domestic employees less for the same work. It also means your domestic selling prices go down but your international prices go up (relative to you as the business).

So an ideal situation to benefit would be one where all your employees and facilities are American, but you sell most of your product internationally.


----------



## ddkay

Chart by Michael McDonough... PIIGS are doomed.


----------



## donald

That seems to be the story with most of the multi-national industrials,most products are made in america,from americans,then shipped out.

I would think,unless im wrong ko would be in this position also.

I was also reading in the wall st journal they were saying the consumers like toothpaste ect are going to rise.

Investing aside,im glad im not living in america right now!!damn there in a mess,imo were luck right now to be in canada,its getting harder and harder for joe smith american.


----------



## ddkay

The problem with depreciating your currency in a global recession, is that everybody is doing it... it leads to currency wars, and the net positive effect is close to zero.


----------



## doitnow!

Jon_Snow said:


> Thanks for the admonishment doitnow.
> 
> But I still think tomorrow is going to be fascinating.


Maybe "fascinating" and "anxiety" provoking (at least for some of us)


----------



## doitnow!

Addy said:


> Maybe so doitnow, but I for one hope the market tanks so I can go on a spending spree.


Get your shopping cart ready


----------



## andrewf

If countries like China and Brazil allowed their currencies to rise, it might help quite a lot with the structural problems we are facing.


----------



## Argonaut

Some of my stocks are getting slaughtered. RioCan opened up -12%.. what is this madness? My TFSA is going to fall to zero while my non-reg account shoots to the moon. Damn.


----------



## HaroldCrump

Argonaut said:


> Some of my stocks are getting slaughtered. RioCan opened up -12%.. what is this madness? My TFSA is going to fall to zero while my non-reg account shoots to the moon. Damn.


A lot of REITs are dropping.
Does RioCan have any US exposure? That might explain part of it.
But in general, nothing seems to matter.
Q2 earnings are getting lost in the noise.
I suspect for the next few days, none of the micro factors will drive the stock valuations, only the macro factors.


----------



## humble_pie

harold ottoyh why do we think reits are getting smashed particularly.

seems to be commercial property reits, my best guess would be predicting recession, or ??


----------



## ddkay

Chances of a double dip increased from 1/3 last week to 2/3 this week. Park cash, or buy puts, don't buy Bear Stearns and prosper.


----------



## Sampson

humble_pie said:


> my best guess would be predicting recession, or ??


I agree with this. I think its an access to capital issue. Money might be almost 'free' to borrow, but who's willing to lend. 

That's been the story for years now, and if anything, I think the recovering REIT prices (over 3 yrs) included a lot of anticipation that things would stagnate, but pick up after a few years.

This seems less likely every day now.


----------



## Argonaut

RioCan is now down only 3.3%. Bizarre. If I had better trigger fingers I could have made 8% on a defensive stock in an hour. I think this recent volatility is ample opportunity to lay in some stink bids.


----------



## humble_pie

argo aren't you supposed to be at work ...


----------



## Argonaut

10:45-6:45 pacific.


----------



## andrewf

I sold my Canadian REIT allocation on Friday. The pace of this correction is quicker than is usual. Usually the market trends under the 200 day before the floor falls out. Oh well, you get bitten by some. I did overall make a nice profit on my REIT position established in early September '10. If we revisit the lows seen in 2009, I'll be quite happy to buy more.


----------



## ddkay

Tepper's Appaloosa Exits Financials



> It looks like David Tepper, the manager of the $15 billion hedge fund Appaloosa, is no longer one of the bigger bulls when it comes to the financials.
> 
> While Tepper won’t comment, I’m hearing he has completely eliminated his 17 million shares position (at last 13-F filing) in Bank of America [BAC 7.07 -1.10 (-13.46%) ], as well as, selling his entire position in Wells Fargo [WFC 24.675 -0.535 (-2.12%)].
> 
> While Appaloosa still has a position in Citi [C 30.7493 -2.6907 (-8.05%)], I’m told it has also been sharply reduced.
> 
> At the Ira Sohn Conference in May 2010, Tepper gave a full-throated endorsement of names such as BAC and Citi, saying he thought Bank of America could go to $27 a share within a year.


----------



## ddkay

HaroldCrump, did you know Europe counted for 20% of Q2 US corporate earnings?


----------



## Yudansha

If the REIT drop keeps up I might move the last of my bonds into REITs for my TFSA...


----------



## gibor365

ddkay said:


> Chances of a double dip increased from 1/3 last week to 2/3 this week. Park cash,...


By "park cash" do you mean - sell ?


----------



## ddkay

If you can bleed a few more days/weeks and accept that the government may not be able to blow this bubble back up, hold. Italy is significantly larger than Lehman. This definitely is still not the time to buy. If you discover a way to hedge your portfolio, do that. As John Maynard Keynes once said, "markets can stay irrational longer than you can stay solvent".


----------



## HaroldCrump

humble_pie said:


> harold ottoyh why do we think reits are getting smashed particularly.
> 
> seems to be commercial property reits, my best guess would be predicting recession, or ??


I think it's the expectation of overall reduced economic activity.
Office space, industrial space, shopping malls, etc. are hardest hit during recessions.
The residential property REITs - such as CAR and TGA - while down quite a lot, aren't hit as hard as the commercial/industrial property ones.
I'm also guessing that any of the Canadian REITs with properties in the US are getting hit harder than pure Canadian ones.
Such as Artis (AX), which has an aggressive US expansion policy, esp. in the mid-west.
REITs with long term locked in leases and long term fixed mortgage rates are faring a little better, such as AAR (down only about 8% from recent highs).
But it's small size and lack of broad visibility may also be helping it fly under the radars.


----------



## Yudansha

Well after a 500 pt drop on the DOW today, does anyone get the feeling this isn't just a 10% correction? 2008-09 at least had a few decent rallies to offset losses.

Today has changed my overall outlook on the markets, and unless we experience a rally this week, I am going to move into full bear mode.

Although I keep telling myself to hold on and am optimistic we are almost at bottom, what if the bottom isn't until 9000, 7000 or back around 6000 pts? 

Has anyone else's market views changed today?


----------



## Abha

Yudansha said:


> Well after a 500 pt drop on the DOW today, does anyone get the feeling this isn't just a 10% correction? 2008-09 at least had a few decent rallies to offset losses.
> 
> Today has changed my overall outlook on the markets, and unless we experience a rally this week, I am going to move into full bear mode.
> 
> Although I keep telling myself to hold on and am optimistic we are almost at bottom, what if the bottom isn't until 9000, 7000 or back around 6000 pts?
> 
> Has anyone else's market views changed today?


I can't imagine the market falling to those levels...we are in trouble from a macroeconomic perspective but corporate earnings just don't justify the panic being displayed right now.

Take a look at Apple. Trading at 12 times earnings TODAY. That is crazy cheap for a company with 75 billion+ in cash and cash equivalents.

I for one will backup the truck on more apple shares if it keeps dropping.


----------



## ddkay

Today I learned, the market isn't based on backwards looking corporate earnings.


----------



## fatcat

at least we have a sort-of answer to the question posed by the original post .... yes


----------



## Belguy

Back in 2008, my portfolio lost 43 per cent of it's value, peak to trough. 

Time will tell if this correction is less or more severe.

Bank of America stock lost 20 per cent of it's value just today!!

By comparison, I lost only 10 per cent of my value and so, despite my losses, I did better than them!!!


----------



## KaeJS

Abha said:


> I can't imagine the market falling to those levels...we are in trouble from a macroeconomic perspective but corporate earnings just don't justify the panic being displayed right now.
> 
> Take a look at Apple. Trading at 12 times earnings TODAY. That is crazy cheap for a company with 75 billion+ in cash and cash equivalents.
> 
> I for one will backup the truck on more apple shares if it keeps dropping.


You are 100% Correct.

But, you are always looking at the market from a logical point of view. The market is not rational. There are a lot of stupid people trading in these markets, and a lot of emotional sellers, along with margin calls and stop losses.

AAPL has no business dropping in value - but its the sentiment, and the sentiment is currently FUBAR.

And in no way am I intending to be rude whatsoever. Looking at the market logically is good, but sometimes it doesnt count for shyt, kinda like love


----------



## ddkay

QE != logical market. Prices were manipulated up. Everyone loves HFTs when the market moves up, but everyone hates HFTs when the market moves down.

What happens if tomorrow Ben does nothing? What if he likes markets that move on their own? You know, the way they're supposed to?


----------



## Causalien

Holy ****. I was right. Didn't turn on my computer until 3 hours after market closed. Was running a half marathon. 

Now the market has dropped enough to warrant QE3. If Le Bernanke doesn't say QE3 on Tuesday, expect a drop that's more than 2008~2009. Yes, we might see 1000 point drops this time.


----------



## KaeJS

^^ Can someone tell me what time Bernanke will be speaking tomorrow, along with the time zone (eastern, pacific, etc) 

I must be out to lunch, but I cant find this information.


----------



## Belguy

http://www.cnbc.com/id/39610971/Stocks_to_Open_Higher_Bernanke_to_Speak


----------



## Abha

KaeJS said:


> You are 100% Correct.
> 
> But, you are always looking at the market from a logical point of view. The market is not rational. There are a lot of stupid people trading in these markets, and a lot of emotional sellers, along with margin calls and stop losses.
> 
> AAPL has no business dropping in value - but its the sentiment, and the sentiment is currently FUBAR.
> 
> And in no way am I intending to be rude whatsoever. Looking at the market logically is good, but sometimes it doesnt count for shyt, kinda like love


I intend to manipulate these irrational markets to my advantage. There simply is no reason for this market crash. I get the variables that are of concern to people, but the reality is, markets don't crash in a matter of days. 

When I see TZA up 20% in 1 day, I know something way beyond rational panic is moving the markets lower.

I haven't been investing as long as some of you guys, but when I started investing in University I had a 4 figure account. Since then that account is now 6 figures. 

You have to buy the panic and the blood. I did the same thing in 2008. Took out a 100k loan and loaded up on bank stocks for my RRSP. Rode the wave up, sold the stocks and closed the LOC. 

I intend to do the same thing again. I know I always advise people against borrowing to invest, but I can stomach the risk. 

How's your TZA doing KaeJS? Still holding?


----------



## ddkay

@Belguy, he's going to be at the FOMC meeting tomorrow http://www.federalreserve.gov/monetarypolicy/fomccalendars.htm


----------



## KaeJS

^ Still holding TZA.

I have sold in and out of it a few times, but have been more or less stable. I did quite well today.

And yes, I also agree with the whole "there is no reason" for this. There isn't. But to be honest - I'm scared to buy until I see some freaking green numbers.

I actually think there will be another double dip. Everyone is scared shitless, regardless of the fundamentals.


----------



## Homerhomer

KaeJS said:


> And yes, I also agree with the whole "there is no reason" for this. There isn't. But to be honest - I'm scared to buy until I see some freaking green numbers.
> 
> I actually think there will be another double dip. Everyone is scared shitless, regardless of the fundamentals.


I disagree ;-), there is plenty of reasons for this and I actually think there was no (good) reasons for the stocks to raise this fast since March 09.

Following are few reasons:

1) High unemployment
2) US banking system is still crappy at best 
3) Global debt is out of control, US being the biggest problem but some european nations are in even worse shape, there is no solution in sight
4) Asian economies slowing down, 
5) Asian inflation, possible RE bubble in China
6) Any attempts to stabilize failed miserably, printing money hasn't worked, free credit didn't fix anything
7) Middle east with troubles brewing on every corner
8) Wild swings in the markets are actually not that unusual, losses of over 6% on S&P happen once every couple of years on average, although if you look at the statistics if there is one huge drop, quite likely it will be followed by another one shorly.
9) Not everyone is scarred shitless, most talking heads on TV see it as a soft patch and buying opportunity, when they start panicking it's time to load up (even margins ;-)
10) US downgrade, it spooked some but to be honest it's like saying water is wet, it's so obvious.


Yes, the earnings have been good so far but why:
1) cut workforce adding to bottom line
2) for US companies benefiting from foreign exchange
3) free credit

Emerging middle class in India and China has been the only saving grace.

Fundamentals as a whole are lousy.


----------



## KaeJS

Belguy said:


> http://www.cnbc.com/id/39610971/Stocks_to_Open_Higher_Bernanke_to_Speak


Thank you, my buy-and-hold friend! 

Cheers!c


----------



## KaeJS

Homerhomer, does that mean you expect a double dip, too?


----------



## Homerhomer

KaeJS said:


> Homerhomer, does that mean you expect a double dip, too?


 lol I am glad I made myself clear 

I think so because of the poor fundamentals and not despite good fundamentals.


----------



## Belguy

The more that I see and hear, the more I am convinced that we are entering another recession. I remember the concerns that I had back in 2008--and they were considerable but somehow it seems to be even worse this time. Back then, it was the banks that were in trouble but now it is sovereign nations. Back then, the powers that be seem to have more weapons in their arsenals than they do now where they seem to be left with very little to work with to try to turn things around.

Tonight on CNN, they asked a Pimco manager how bad he thought things were and his only response was "bad"!

I know that there are always those who proclaim in a market correction that "this time it's different" and yet the markets generally rebound fairly quickly as they did back in 2009. However, this time, my concern is that we may not be so lucky.

Time will tell! Sleep tight!!


----------



## KaeJS

World markets

Shanghai 2,464.93 -61.89 (-2.45%) 
Nikkei 225 8,661.51 -436.05 (-4.79%) 
Hang Seng Index 18,965.45 -1,525.12 (-7.44%) 
TSEC 7,160.87 -391.93 (-5.19%) 
FTSE 100 5,068.95 0.00 (0.00%) 
EURO STOXX 50 2,286.91 -88.24 (-3.72%) 
CAC 40 3,125.19 -153.37 (-4.68%) 
S&P TSX 11,670.96 -491.21 (-4.04%) 
S&P/ASX 200 3,787.50 -198.60 (-4.98%) 
BSE Sensex 16,990.18 -315.69 (-1.82%) 

^ This is the first time I've seen anything like this. Definitely a new experience for me.

Belguy, I was also watching CNN tonight. I cant remember who said it, but someone was speaking to a panel of 4 people, and he said "Do you think we are headed for a double dip recession?" and this one lady in Asia says in response "Asia thinks so."


----------



## blin10

it's crazy how people were so optimistic just 2-3 weeks ago, I recall reading people were saying "staying 100% in the stocks" to "omg double dip recession".... nobody knows where the bottomis , but 105 on SPY will have some major support


----------



## fatcat

> Tonight on CNN, they asked a Pimco manager how bad he thought things were and his only response was "bad"!


right, yeah pimco ... didn't they also famously predict that treasuries were going in the crapper ... they are fully committed to their narrative (but they may be right)


----------



## donald

Anybody think machine and computer trading is having a part in this?Investors going buy there various programs,thats where the extra wack in wacked is coming from,or is this invalid?


----------



## ddkay

*u.k. Ftse 100 index sept. Futures plunge 7% in london - bloomberg


----------



## blin10

donald said:


> Anybody think machine and computer trading is having a part in this?Investors going buy there various programs,thats where the extra wack in wacked is coming from,or is this invalid?


it's 100% machines doing all the work... I was reading a year ago, top programmer at goldman sachs took some codes after he quit the job, then there was fbi on his ***...


----------



## Belguy

Does anyone know where there is a high bridge?


----------



## Argonaut

I cashed out puts before I went to work (blasted work, what a waste of my time during this epic crash!) and am only protected by a lonesome GLD call. Thankfully it is ironclad protection of the highest degree. The Federal Reserve meeting tomorrow will be telling. Honestly, if QE3 is announced I think markets will laugh at it and continue to plunge.

To make money in the stock market you have to trade.

*Buy and hold is dead.*


----------



## ddkay

Don't tell that to Mr. Buffet. Oh, wait.

S&P strips Berkshire Hathaway of AAA rating



> (Reuters) - Standard & Poor's on Thursday stripped Warren Buffett's Berkshire Hathaway Inc (BRKa.N) (BRKb.N) of its top AAA rating, saying its acquisition of Burlington Northern Santa Fe will hurt liquidity and capital adequacy.
> 
> The rating downgrade came on the same day that Berkshire launched an $8 billion bond sale to help pay for the Burlington acquisition.


----------



## Mockingbird

Busy evening. Various exchanges revising their margin requirements.

MB


----------



## avrex

Belguy said:


> http://www.cnbc.com/id/39610971/Stocks_to_Open_Higher_Bernanke_to_Speak


That would be an old June link.

On Tuesday, Bernanke won't actually speak, as there will be no press briefing.
Instead, the FOMC statement will be released around 2:15 PM ET Tuesday.

http://www.businessinsider.com/a-preview-of-tuesdays-huge-fed-meeting-2011-8


----------



## KaeJS

Argonaut said:


> (blasted work, what a waste of my time during this epic crash!) ]


Funny. I said almost the same identical words while I was at work today....


----------



## clovis8

Argonaut said:


> To make money in the stock market you have to trade.
> 
> *Buy and hold is dead.*


If only 100% of the research didnt prove just the opposite you might have a point.


----------



## donald

I said today(as my portfolio got creamed)Thank-god for work!lol'

Im thinking the "human capital market is the best here"lol


----------



## Argonaut

clovis8 said:


> If only 100% of the research didnt prove just the opposite you might have a point.


Right, I'm only beating the TSX by over 25% this year. I better change my strategy before it catches up!

Factoring in inflation, market performance, and the declining value of paper money, the last 10 years have literally set index investors back a lifetime. They will never make their capital back. Ever.


----------



## clovis8

Argonaut said:


> Right, I'm only beating the TSX by over 25% this year.


Solid sample size.


----------



## liquidfinance

I just don't have enough cash available to go shopping for all the bargains that are being created.

Save Save save and then i'm going to go on a shopping frenzy. I do feel sorry for those who don't have time on their side though.


----------



## dogcom

Clovis8 argonaut is simply stating the fact that you trade to make money in a secular bear market. 

Buy and hold is perfect in a secular bull market. Gold is in a secular bull market since 2001 so buy and hold works for gold. After gold spiked in the early 1980's buy and hold was a disaster unless you lived long enough for the secular bull to come back.


----------



## clovis8

dogcom said:


> Clovis8 argonaut is simply stating the fact that you trade to make money in a secular bear market.
> 
> Buy and hold is perfect in a secular bull market. Gold is in a secular bull market since 2001 so buy and hold works for gold. After gold spiked in the early 1980's buy and hold was a disaster unless you lived long enough for the secular bull to come back.


Well no that is not what he said. That would have been perfectly reasonable. He said buy and hold was dead in really big bold letters then followed it up by stating that CP investors will never make they money they lost back, as if we all have 3 year timelines.

That is where my problem lies since its provably false. If you look beyond a one person sample size, and a long time frame, traders lose and holders win. period. Arguing the opposite is no different than arguing against gravity.


----------



## the-royal-mail

liquidfinance said:


> Save Save save and then i'm going to go on a shopping frenzy.


How refreshing to hear after the recent posts I've read in CMF about using emergency funds or borrowing to invest.


----------



## CanadianCapitalist

I've heard that Buy and Hold is Dead more times than I care to remember. Of course, buy-and-holders don't make money every year like clockwork. They have winning years, some losing years and by holding long-term they earn respectable rates of return.

It's hard to argue when you make numbers up. The CP portfolios similar to mine have returned 3.5% over 10 years between 2001 and 2010. That doesn't sound like loss of capital to me.


----------



## kcowan

Been at my son's cottage NW of Apsley, SE of Bancroft in North Kiwartha Lakes, It is a great time to be enjoying the summer and not worrying about anything. I heard on the radio this AM that the Hang Seng was down over 5% again yesterday.

I wonder what the world will be like when I get home in a week?


----------



## Jungle

What was the reason why markets are up this morning?


----------



## gibor365

CanadianCapitalist said:


> . The CP portfolios similar to mine have returned 3.5% over 10 years between 2001 and 2010. That doesn't sound like loss of capital to me.


3.5% per 1 year or per 10 years?


----------



## andrewf

Jungle said:


> What was the reason why markets are up this morning?


They were severely oversold, a bounce is normal, even if it continues lower.

gibor: that's per year. Believe it or not. Bonds help stabilize a portfolio quite substantially.


----------



## gibor365

andrewf said:


> They were severely oversold, a bounce is normal, even if it continues lower.
> 
> gibor: that's per year. Believe it or not. Bonds help stabilize a portfolio quite substantially.


Jungle, also Feds meet at 2.15pm, market will be very volitile depends on hints and rephrases they say... too bad my English is not so good to understand all hints. 

3.5% per year is not that bad, even though with laddered GIC return would be a little better and w/o headache


----------



## riamo

why not buy and hold for 10-30 years in a broad index fund?

companies on the broad stock market are going to give value to investors..thats what they try to do..if they cant make earnings they slash jobs..its simple..their goals is to keep investors happy and they will do what they can

last few days was emotions..live with it


----------



## the-royal-mail

Yes, I would say if someone managed 3.5% per year over the past 10 years, they have done very well for themselves. I don't think it's typical though.


----------



## Yudansha

Looks like this bounce today is withering.... More red for the week? Will whispers of QE3 change anything? 

I'm going to the bank later this week to look at some financing options....Need cash for juicy companies.


----------



## Jungle

Funny banks jumped right up. But days like this also happened on 08. Then when you think everything is cool, bloodbath continues. 

SO hard to buy stocks right now! I do believe most of these companies have a little value right now. Or you could say selling at a good-ok price.


----------



## Belguy

http://www.urbandictionary.com/define.php?term=dead cat bounce&defid=4736534


----------



## Lephturn

I'm dredging savings and getting ready to plunge in good dividend growth stocks. This is money I plan to put in this year anyway, and it's great to put it in as things go down. Sure they could go down more... and if they do I'll see if I can dig up more cash to put in.

I'm watching option pricing and implied vols - as the volatility starts coming in I'll look to sell my puts and roll the cash into the dividend stocks I own. I'm willing to go "naked" on these solid dividend players for a while - I'll put protection back in place later.


----------



## CanadianCapitalist

gibor said:


> 3.5% per 1 year or per 10 years?


Sorry I should have made it clearer. That 3.5% annualized over 10 years. And this is a portfolio with 20% bonds and 5% cash and significant holdings in US and EAFE markets whose 10 year returns especially in C$ have been terrible. I haven't been investing for 20 years but the same portfolio would have returned 8.35% in the 1991 to 2010 period. 

I should caution that going forward, the expectations are a bit lower. 2.6% dividend yield plus 2% real earnings growth means one can expect 4.5% real returns on the TSX. US markets about 4% since the dividend yields are a bit lower. Assuming 0% real returns from bonds and 4% from stocks, a 25/75 portfolio can be conservatively expected to earn an inflation-adjusted 3% over the next 20 years.


----------



## Jungle

What channel will have Bernanke's speach this afternoon? 

BNN?
CNN?


----------



## gibor365

Jungle said:


> What channel will have Bernanke's speach this afternoon?
> 
> BNN?
> CNN?


.
Bernanke won't talk today  
Propably he didn't get invited in order not to spoil party 
Bernanke will be talking in the end of Aug (26 or 28 - don't remember exactly)


----------



## ddkay

Look where the Dollar Index (solid black line) is relative to WTI Crude Oil (solid black/red line) today, and where it was in August 2010 when QE2 was announced, or October 2008 when QE1 was announced. The dollar is too weak to think about QE3 yet, IMO.


----------



## ddkay

Here's the VIX pit today at the CBOE before the FOMC minutes


----------



## gibor365

what is going on?


----------



## zylon

What I want to know is ...

*where are the women?*

I don't see any


----------



## ddkay

I counted 3!


----------



## gibor365

All markets (and XIV) jumping like crazy...every second....


----------



## doitnow!

http://watch.thecomedynetwork.ca/the-colbert-report/full-episodes/#clip513283

For a little comic relief during these stressful times check out Jon Stewart's hilarious critique of the Standard & Poor's downgrade. It highlights the hypocrisy of the power players involved and exposes their laughable decisions.


----------



## ddkay

2:33 (Dow Jones) Markets wanted a lot out of the Fed. Did they get it? Not really. The big move would have been to restart asset purchases, and that didn't happen. Precommitting on rates is a fairly small step, and markets had already been expecting the zero percent funds rate to stick around for a long time to come. But given the discomfort of so many central bankers to the new rate guidance, this may have been all Bernanke could get out of his committee. It points to a Fed that will have to battle itself if it wants to provide more support to the economy. ([email protected])

2:34 (Dow Jones) According to Wrightson ICAP, there have been no triple dissents on FOMC since 1994, when the Fed began to tell the public the outcome of their monetary policy meetings. The level of dissent is certainly unprecedented for the modern period of Fed policy, that's for sure. ( [email protected])

The three dissenters were Fisher, Kocherlakota and Plosser


----------



## HaroldCrump

....and the markets turn negative again.
TSX is giving back much of the gains.
Here we go again


----------



## Homerhomer

HaroldCrump said:


> ....and the markets turn negative again.
> TSX is giving back much of the gains.
> Here we go again


Yeah, DJ plunged 250 points before I could take first sip of a coffee I made two minutes before ;-).

Cash is still king IMO.


----------



## gibor365

Holy ****....I've never seen such rollercoaster, VTI hardly dropped to -1.7% and now up +0.42... indexes jumping hundreds of points every couple of seconds.....


----------



## Jon_Snow

I knew Big Ben would make me feel better about not buying yet.

He came through for me big time. Love the guy. He's a sexy beast.


----------



## fatcat

this is nuts ... the fix is in ... it's all one big computer
it is going nuts


----------



## gibor365

fatcat said:


> this is nuts ... the fix is in ... it's all one big computer
> it is going nuts


Agreed..
I just refresh webpage and DOW and TSX moving more than 100 point any direction  I become dizzy from rollercoasters, last hour I became even more dizzy from markets

XIV for 15 min spread (between Yahoo real time and regular) - is about 5%


----------



## Abha

gibor said:


> Agreed..
> I just refresh webpage and DOW and TSX moving more than 100 point any direction  I become dizzy from rollercoasters, last hour I became even more dizzy from markets


Sit tight guys, we've seen nothing yet. Although I am impressed that we've been able to hold so far given the lack of a major announcement.

This is close to the bottom but I am now inclined to believe we'll move slightly lower.


----------



## Four Pillars

Hmmm...looks like VTI popped down to $56.42 for a bit. I have a limit order at $56.30 - almost!


----------



## Yudansha

Abha said:


> Sit tight guys, we've seen nothing yet. Although I am impressed that we've been able to hold so far given the lack of a major announcement.
> 
> This is close to the bottom but I am now inclined to believe we'll move slightly lower.



I agree, lots of volatility but I think many people (myself included) are expecting/hoping to hit bottom soon if not this week then next week.


----------



## gibor365

Four Pillars said:


> Hmmm...looks like VTI popped down to $56.42 for a bit. I have a limit order at $56.30 - almost!


as per 3.30 it's 58.61...


----------



## gibor365

Abha said:


> Sit tight guys, we've seen nothing yet. Although I am impressed that we've been able to hold so far given the lack of a major announcement.
> 
> This is close to the bottom but I am now inclined to believe we'll move slightly lower.


IMHO (even though I'm a newbie) if without "major announcement" markets will rebound back up.... it's a good sign, we're at the bottom...


----------



## andrewf

gibor said:


> 3.5% per year is not that bad, even though with laddered GIC return would be a little better and w/o headache


Keep in mind, it could have been higher than 3.5%. You don't know in advance. The past ten years have been pretty challenging for equities. If you had a decade like the 1990s, it would be a significantly different story.


----------



## Mockingbird

gibor said:


> Holy ****....I've never seen such rollercoaster, VTI hardly dropped to -1.7% and now up +0.42... indexes jumping hundreds of points every couple of seconds.....


Typical market behavior when it tries to find bottom.
Definitely a trader's market. 

MB


----------



## Jon_Snow




----------



## ddkay

Abha said:


> This is close to the bottom but I am now inclined to believe we'll move slightly lower.


Abha about to throw in the towel, market has a rip off rally


----------



## Lephturn

Looking really bottomy - big dip around 2:30 for FOMC, then a nice run up. Closing at the high of the day on massive volume looks nice.

Could just be a retracement - but I am looking at a nice buying opportunity here.


----------



## sensfan15

I don't understand why traders subject themselves to so much stress. There is much more to life than watching every single up or down tick everyday. Just buy solid companies when they are at depressed prices that increase dividends and call it a day


----------



## Cal

Completely agree w sensfan above.

But I still won't cheer for the sens.


----------



## Belguy

I'm not saying that my way is the only way but I do think that a lot of investors do too much tinkering with their portfolios. Before I knew better, I used to invest primarily in managed mutual funds. However, starting in mid 2005, I saw the light and set up a portfolio of largely broad-based ETF's. From July 3, 2005 until July 2, 2011, this portfolio returned a total of 42 per cent, including reinvested dividends for an annualized return over the 6 year period of 7 per cent a year. During that period, I never did a thing to try to time the markets as I consider myself a strictly buy-and-hold investor. I leave the market timing to others and wish them the best of luck in their endeavors. The only trading that I did was for rebalancing purposes and I try to even keep that to a minimum.

This form of investing would be far too boring for some but it has worked well enough for me so far such that I do not intend to alter my plans except to change my asset allocation to a more conservative slant at a time when capital preservation is taking on more importance because of my age and circumstances.

I still maintain that one of the very best investment books ever written is the children's classic 'The Tortoise and the Hare'!!

Note that I have never sold anything in a panic but it has been something of a rollercoaster ride, I do have to admit.

Buy broad based index funds, hold, rebalance, and prosper.


----------



## Abha

ddkay said:


> Abha about to throw in the towel, market has a rip off rally


Why would I throw in the towel when I'm riding the waves.


----------



## ddkay

I meant throw in the towel on your general market view == bullish based on historical earnings, while most indices around the world are down significantly YTD http://pastebin.com/raw.php?i=Yd5XFTT7


----------



## marina628

Thanks to Belguy for helping me buy my first of many ETF


----------



## ddkay

I'm neutral at this point, when the DOW is screeching up and down between 900 pts a day it's tough to find high probability trades, you can make a lot of suicide trades though. I noticed XLF is still in a downtrend channel and the VIX had a 2:1 call to put ratio today, so the so called 'smart money' are still being cautious.


----------



## gibor365

ddkay said:


> and the VIX had a 2:1 call to put ratio today, .


Can you pls explain?


----------



## gibor365

Hmmm...interesting that DOW futures down 57 points


----------



## Argonaut

I think cash is the smart trade right now. If the markets go down, you will get better deals still. If the markets go up to pre-correction levels, they will be overvalued. Swapping cash for cash may be even smarter. I'm talking about the Swiss Franc of course. They announced an attempt to weaken their currency and the market laughed. Japan can't even do that, and it's the third biggest economy in the world.


----------



## KaeJS

gibor said:


> Can you pls explain?


I think what ddkay meant to say is a "put to call" ratio, not a "call to put" ratio. This means that there are twice as many puts as there are call options.

Basically, in a nutshell, if there are still 2x as many puts as calls, people are still trying to "hedge" their portfolio's or minimize potential risk/loss in case of a market downturn.

It shows a bearish sentiment.


----------



## Argonaut

Call to put ratio was right. Calls in VIX are bearish and puts vice versa.


----------



## ddkay

gibor said:


> Can you pls explain?


I meant call to puts, specifically referring to the VIX: http://www.cboe.com/data/mktstat2.aspx#VIX

There were 591,344 calls vs 338,131 puts, so general option trader sentiment is the VIX may go higher, simply implying more rip-your-face-off volatility in the days ahead


----------



## KaeJS

Sorry, gibor.

Yes, the *VIX* generally trades opposite to the S&P 500.

So a high call to put ratio (like ddkay said, of 2:1) is a bearish sentiment. I should have paid more attention.

Thanks, Argonaut.


----------



## Montyswe

Belguy said:


> I'm not saying that my way is the only way but I do think that a lot of investors do too much tinkering with their portfolios. Before I knew better, I used to invest primarily in managed mutual funds. However, starting in mid 2005, I saw the light and set up a portfolio of largely broad-based ETF's.



Belguy,

What ETF´s do you have?

cheers


----------



## Argonaut

Today's action has confirmed it. We are in grizzly bear territory. Hold onto your horses and your puts.


----------



## ddkay

Check out the ~93K calls at $30 strike August 20 on SDS (ProShares UltraShort S&P500) http://www.google.com/finance/option_chain?q=NYSE:SDS


----------



## humble_pie

ddkay i didn't look, not going there.

but to my mind hi institutional volume in a call suggests the party is shorting & bought the calls as a cover.

hmmmn shorting the ultra short, would that make sense ...


----------



## el oro

Argo, nothing looks confirmed to me. The highs and lows of yesterday have not been exceeded in anything except gold from what I've looked at.


----------



## ddkay

Is Societe Generale going Lehman on us?












> September 11, 2008
> 
> SAN FRANCISCO (MarketWatch) -- Spreads on Lehman Brothers credit default swaps widened to between 775 and 800 basis points during morning trading on Thursday, according to Credit Default Research. That's wider than Bear Stearns CDS spreads before that brokerage firm was bailed out in March, CDR noted. Yesterday, CDS spreads on Lehman ended below 600 basis points. CDS are a common type of derivative contract that pays out in the event of default. When the difference, or spread, between rates on these contracts and rates on U.S. Treasury bonds increases, that suggests investors are more worried about a potential default.


----------



## doitnow!

Fascinating! 

From the point of view of someone new to the markets, the last few days support what I think Belguy's been saying: the markets are a mug's game and trying to predict's them is for those who like to gamble.

A good chunk of my portfolio is in broad based etf's and I am now learning what is necessary to intelligently pick a few very boring mature companies to invest the balance with a eye on long term dividend growth. Any deals out there?


----------



## ddkay

I have some bids setup for 10% of my portfolio on telecom/utilities, specifically Bell Aliant (BA.TO) which I think looks attractive under $25 or Northland Power (NPI.TO) which I think looks attractive under $11.


----------



## ddkay

"The risk of double dip recession is rising.

And while economists disagree on just how likely the U.S. economy is to fall into another downturn, they generally agree on one thing -- a new recession would be worse than the last and very difficult to pull out of.

"Going back into recession now would be scary, because we don't have the resources or the will to respond, and our initial starting point is such a point of weakness," said Mark Zandi, chief economist at Moody's Analytics. "It won't feel like a new recession. It would likely feel like a depression.""

http://finance.yahoo.com/news/Double-dip-recession-would-cnnm-3944039611.html?x=0

Stock markets are reactive to the credit market (the sovereign CDS I posted earlier), not proactive. So I don't think an equity sell off on its own could predict a recession/depression, but the stuff happening in Europe combined with global economic indicators, the equity selloff and rush into US-Treasuries can, at least to a higher degree...


----------



## doitnow!

ddkay said:


> I have some bids setup for 10% of my portfolio on telecom/utilities, specifically Bell Aliant (BA.TO) which I think looks attractive under $25 or Northland Power (NPI.TO) which I think looks attractive under $11.


Thank you! will look into these. 

I've been reading on dividend investing and some of the classics suggest that those with little (like me) investment experience should stick to the tried & true, boring and safe. ie: coca cola, proctor and gamble, rogers, wallmart...


----------



## Belguy

Here are my current asset allocation targets:

40% Bonds (wish it was 50%!): Primarily PH&N Bond Fund D with some high yield and emerging markets debt added in.

12% Canadian Value Equity: XCV
8% Canadian SmallCaps: XCS

Although value investments have generally outperformed in the long term, XIU could be a better choice than XCV. SmallCaps have also generally outperformed in the long run but will likely add additional volatility to a portfolio.

8% U.S. LargeCaps: XSP
4% Russell 2000: XSU

These are hedged ETF's. A good unhedged alternative might be a 12% allocation to VTI.

8% International Equity: VEA

10% Emerging Markets Equity: VWO

4% Real Estate: XRE

6% Precious Metals: RBC Global Precious Metals Fund

I welcome and criticisms or suggested alternatives to this asset allocation target the basis of which was derived from a model portfolio found at www.canadiancouchpotato.com where other suggested allocations are posted. 

The important thing is to not pick your own personal asset allocation according to what others have chosen as everyone's circumstances and risk tolerance is different. Currently, the markets may be providing you with a good opportunity for you to review your own risk tolerance. Is it as great as you thought that it was when markets were rising? Also, age and time horizon have to be considered when establishing your target asset allocation.

After choosing your asset allocation and picking your individual investments, the important thing is then to stick with your plan and trade only once a year or so for rebalancing purposes and not as a result of market volatility.

This has been a time tested approach to investing but, I do have to admit, that it can be quite boring and may not satisfy those who get their kicks out of active investing and market timing. It's a good thing that we are not all the same!!

Buy mainly low fee index products, HOLD, rebalance, and prosper.

I hope that my time and experience in the market will help some young investors out there with long time horizons. For those investors especially, I say to not worry about short term market noise!!


----------



## Homerhomer

Belguy said:


> . For those investors especially, I say to not worry about short term market noise!!


It's all good my friend, the only issue is you do not practice what you preach ;-)

We have had a bit of short term noise in the last couple weeks and who was having a forum panic attack ;-)


----------



## Belguy

I am not really panicking myself but I do plead guilty to being a fear monger at times and I realize that I shouldn't do that!! I never sell out of fear or panic and just stay on for the full rollercoaster ride and so I do practice what I preach that way.

That said, after the 43% drop in my portfolio as recently as 2008, I was sort of hoping that history would not repeat itself so soon again. While it hasn't dropped that much this time around, the markets will likely be volatile for some time now and it will be interesting to see how this portfolio performs this time, peak to trough.

I do feel that a quick and fast complete capitulation would be better than many weeks and even months of volatility. Thus, I might actually welcome a drop of 30 or 40 per cent to get all of the negativity out of the way.

Am I out of line with this thinking?


----------



## Homerhomer

Belguy said:


> I am not really panicking myself but I do plead guilty to being a fear monger at times and I realize that I shouldn't do that!! I never sell out of fear or panic and just stay on for the full rollercoaster ride and so I do practice what I preach that way.
> 
> That said, after the 43% drop in my portfolio as recently as 2008, I was sort of hoping that history would not repeat itself so soon again. While it hasn't dropped that much this time around, the markets will likely be volatile for some time now and it will be interesting to see how this portfolio performs this time, peak to trough.
> 
> I do feel that a quick and fast complete capitulation would be better than many weeks and even months of volatility. Thus, I might actually welcome a drop of 30 or 40 per cent to get all of the negativity out of the way.
> 
> Am I out of line with this thinking?



I know you mean well for others so don't take my friendly jabs too seriously ;-)

As for the quick catapult, well IMO the faster it goes down the faster it may come up, however many think that this is what happened in late 08 early 09, partially true because the market topped October 07 and bottomed in March 09, so it took a year and half (although it was in a freefall since Oct 08).


----------



## ddkay

Why is the TSX levitating today? I think Belguy has high risk tolerance I think he can live out what ever scenario happens.


----------



## Argonaut

Nice to see the TSX shrugging off the American sell-off today. Never really seen a divergence like that as far as I can remember. 5% is a big spread. Gold miners leading the charge.

I've done a number of trades in the last couple of weeks, more than I ever have. The funny thing is that I calculated my asset allocation today and its sitting at exactly 50% stocks, 25% gold, and 25% cash.. which is what I've preached this year.


----------



## ddkay

It's not a huge divergence but it's still a divergence and it looks like it started on Monday, maybe it will play catch up later.

5 day 1 minute period chart:









6 month 1 day period chart:


----------



## Argonaut

It's a number of reasons, I think.

1. Not as many short sellers and supercomputers in Canada.
2. A weaker Canadian dollar is good for a lot of companies.
3. Gold.
4. The combination of Harper, Flaherty, and Carney is infinitely superior to Obama, Geithner, and Bernanke.
5. Stability, AAA credit, better economical indicators, etc.


----------



## andrewf

Almost all of that is due to FX changes.

Can't compare SPX in USD and TSX60 in CAD.

For reference, look at EWC (Canada ETF in USD) vs SPY. Almost perfect correlation.

In other words, if you don't hedge for currency changes, S&P500 and TSX60 are performing almost identically.


----------



## ddkay

@andrewf great point, here's the EWC


----------



## Argonaut

Doesn't explain the big gap today. Still, it may even out in the end.


----------



## Belguy

We want complete short term capitulation and the sooner the better! I'm getting tired of this death by a thousand cuts!!

Let's get it all out of the system and then go on from there!! It's not the ultimate losses that get to me so much as the slow, agonizing slide down.

After all, we all just lived through that scenario just a few short months ago and here we are deep in the do-do again!!

Enough already!!!!


----------



## dogcom

No matter what reasons you give I have never ever seen the Dow fall hard and the TSX stay up. Usually or always it doesn't matter how good we look we still sell off. This is the first time you could say this time is different even if it is just one day.


----------



## fatcat

does this help ?

the Nikkei average hit an intra-day high of 38,957.44 before closing at 38,915.87 in 1989

now it is at 9038.74

let's hope we don't _do a nikkei_

i think it took the dow 29 years to recover from depression lows ...


----------



## el oro

Other than the FX differential, the US financials took a beating today. TSX being buoyed by oil, gold stocks and some others, which S&P doesn't have as much of.


----------



## Belguy

On CNBC today, they said that this is looking worse than 1987!!

How bad was 1987? I was too young then to remember!

When asked where an investor should hide in this market, one guest replied "in a rabbit hole"!

Colbert is busy stuffing his duffel bag with chickens! 

Maybe we were as rich a few weeks back as we are ever going to be??


----------



## dogcom

I remember what it was like in 1987. I remember everyone wondering if it was going to be the beginning of the next great depression.

I think the TSX got the memo about being oversold and someone dropped it on the way to the Dow.


----------



## larry81

turnoff CNBC, the dont know what will happens tommorow.

remember 'THE DEATH OF EQUITIES'
http://www.businessweek.com/investor/content/mar2009/pi20090310_263462.htm


----------



## Argonaut

I know a lot of you don't like him, but Cramer had an excellent piece on 1987 yesterday.

http://www.cnbc.com/id/44075834

The most interesting part is that he said if you bought any large cap at all the day before the crash, your position would actually have been up in one year's time.


----------



## Jon_Snow

Thanks for that link.

I'm a Cramer fan.


----------



## Belguy

I am considering changing my member name to '$2500 Gold By Year's End'!!

It sounds original anyway!!!


----------



## KaeJS

I think I officially went from Perma-Bull, to Perma-Bear of the Great White Canadian North. I call 2x dip recession for equities.

If you're not long on gold and shorting everything else - you are losing.


----------



## Belguy

My dream portfolio would have consisted of only two investments--gold and Apple stock!! Hindsight is 50/50!!


----------



## KaeJS

Belguy said:


> My dream portfolio would have consisted of only two investments--gold and Apple stock!! Hindsight is 50/50!!


IMO, it's not too late to jump into AAPL.

Gold might be a long shot, though...


----------



## MikeT

I've added my entire cash emergency fund to my trading account today. I've got my wife's money on the way in too. I was contemplating maxing out my credit cards on a cash advance, still might but I think the interest rate is higher for that than regular purchases so maybe not. I don't know what the rest of you think you are doing, but it's fine by me. The more panic the better.


----------



## Jon_Snow

^^^ Funny guy.


----------



## Argonaut

MikeT: Sounds pretty crazy to me.

On gold: I'm hoping it takes a breather for a while. $100 every couple of days is not healthy.


----------



## ddkay

Move along nothing to see here


----------



## ddkay

If we have another down day tomorrow the SPX will finally form a dead cross


----------



## Eder

We are getting closer to buy time...I love hearing recession,default and the herd panicking.

I hope 3 more weeks is not too long to wait.


----------



## Eder

ddkay said:


> Move along nothing to see here



This has nothing to do with Japan tsunami?


----------



## ddkay

Argo, do you have any option strategies to profit from the parabolic move in gold?


----------



## ddkay

Eder, Japan didn't really help with global growth, but I wouldn't pinpoint it as the only issue


----------



## Argonaut

ddkay said:


> Argo, do you have any option strategies to profit from the parabolic move in gold?


Yes, I have three times bought and sold GLD calls for profits. Today I sold a call for 17.50 that I bought for 7.25. I called Questrade to place a debit spread order to replace that call but they didn't answer after 20 minutes. I am leery about buying more straight up calls because the premiums are getting quite expensive.


----------



## webber22

Just got back from vacation..... what have you guys done to the markets 

The futures are down big now  , no wait, there up huge now


----------



## Mockingbird

ddkay said:


> If we have another down day tomorrow the SPX will finally form a dead cross


Dead Cross. Sounds cool, but sooo overly used. 
Don't you think? 

Many use the combination of 20, 50, 100, 200 with SMA, EMA, DMA on a tick, minute, hourly, daily, and even weekly chart. All creating various dead crosses depending on their methodology. Or one of the trader puts it, one man's dead cross is another man's golden cross. 

Anyways, they confuse heck out of me. 

MB


----------



## Belguy

In most downturns, there are those who say that "it is different this time" but, a few months later, stocks have bounced back and moved on to new highs.

What about this time? Is it different this time or, in a few months time, will the markets have rebounded, as they always have, and moved on to new highs?


----------



## andrewf

In six months, the lucky ones will be gnawing on the bones of civilization in a post-apocalyptic hellscape.


----------



## zylon

*he roams the streets of Belleville ...*

... seeking whom he may devour.

He is beyond the shadow of a doubt, the worst spokesman for the _*Couch Potato Philosophy*_.

But he'd make a heck of a booze salesman.

Markets going up? - celebrate with a drink, we can do no wrong.

Markets going down? - here, have a drink, brace yourself for worse to come.

_______________
sponsored by:
*Beluga Liquor *_- things are never so bad they can't get worse._


----------



## doitnow!

zylon said:


> ... seeking whom he may devour.
> 
> He is beyond the shadow of a doubt, the worst spokesman for the _*Couch Potato Philosophy*_.
> 
> But he'd make a heck of a booze salesman.
> 
> Markets going up? - celebrate with a drink, we can do no wrong.
> 
> Markets going down? - here, have a drink, brace yourself for worse to come.
> 
> _______________
> sponsored by:
> *Beluga Liquor *_- things are never so bad they can't get worse._


Who is he?


----------



## webber22

What's the term for an active couch potato in this environment ? MASHED potato ??


----------



## Argonaut

webber22 said:


> What's the term for an active couch potato in this environment ? MASHED potato ??


Twice baked potato?

Anyway, it's not different this time. Stocks will come back up. The only question is how much further they will fall. The indexes are junk, but the yield on blue chips with sustainable, growing dividends will always buoy their share prices in the long run. 

Does it make sense that Coca-Cola, with a far better balance sheet than the US gov't, is yielding 1% more than a 10 year treasury, with a dividend that grows every year?


----------



## KaeJS

^ Hell. No.

I am almost contemplating on whether or not I should be purchasing dividend payers in order to take advantage of my youth and compound interest, as opposed to risky shorter term swing trading.

Like I've said in a few posts now;

CPG is yieling 7%, BMO 5%, REI.UN 6ish%, SLF 6ish%, BCE ~5.5%, TRP 4.3%

^ Oh, and would you look at that, we have Energy, Financials, Real Estate, Telecom, Transportation

Sounds good to me...

I just cant afford them all. 

At these dividend yields and low prices, with a long term horizon - does it even matter if its the bottom?

Edit: Owning 100 shares of each of the above stocks would net you a gauranteed $101.17/month, not re-invested (dripped), + Capital appreciation.

For me, $101.17/month is quite a bit when its FREE.

And we all know CPG will be over 45 again, BMO will be over 60 again, REI over 25 again, SLF over 28 again
(BCE is a little on the higher side)


----------



## Argonaut

Do you have a TFSA? If you don't, next year on the first day of trading in January, you should dump $20k into a TFSA and split $4000 among five stocks of your choice. This is what I have done with $3000 each so far: IPL.UN, REI.UN, CNR, T, FTS. This dividend portfolio is actually up year to date and yielding nicely. Of course, all of my big gains have been in my non-registered account.. rats..


----------



## KaeJS

^ My TFSA is maxed.

It is currently in Mutual Funds (GASP! , yes, mutual funds). But I will definitely be looking to switch this soon.
My RRSP is also in MF's, and this _needs_ to be switched because my RRSP isn't doing so well. I have made about $500-$600 on $8k in about 1.5 years...

I have left it in MF's because I don't like indexes or ETF's much (except the 3x leveraged inverse ones, of course ) So, I have left it in MF's until I gain a bit more experience in the market.

I would love to split 20.5k over those stocks mentioned above, except replace BMO with TD.

I would like a more secure trading platform like I said before, though. I've never had problems with Questrade, but I just don't feel 100% safe throwing my entire TFSA in there, either...

TDW or BMO Investorline would be nice.
In fact, I am going to look into Investorline at work tomorrow. See if someone can load up their portfolio on it for me.


----------



## blin10

KaeJS said:


> ^ Hell. No.
> 
> I am almost contemplating on whether or not I should be purchasing dividend payers in order to take advantage of my youth and compound interest, as opposed to risky shorter term swing trading.
> 
> Like I've said in a few posts now;
> 
> CPG is yieling 7%, BMO 5%, REI.UN 6ish%, SLF 6ish%, BCE ~5.5%, TRP 4.3%
> 
> ^ Oh, and would you look at that, we have Energy, Financials, Real Estate, Telecom, Transportation
> 
> Sounds good to me...
> 
> I just cant afford them all.
> 
> At these dividend yields and low prices, with a long term horizon - does it even matter if its the bottom?
> 
> Edit: Owning 100 shares of each of the above stocks would net you a gauranteed $101.17/month, not re-invested (dripped), + Capital appreciation.
> 
> For me, $101.17/month is quite a bit when its FREE.
> 
> And we all know CPG will be over 45 again, BMO will be over 60 again, REI over 25 again, SLF over 28 again
> (BCE is a little on the higher side)


that's my plan right now, just load up on some nice divis and call it a day...


----------



## MikeT

So it turns out my mbna card gives the cash advances at the same 6.99% as purchases, but with a transaction fee. So I bit the bullet and withdrew 20k to deposit into my trading account.

My next step tomorrow is to meet with the bank and see what kind of home equity line of credit I can borrow against the house. Maximum possible capital is what I'm going for. I want it ALL in the market very shortly.

Look at those juicy yields. Give me Dow 9000 and it's a go baby!! Keep the bad news and gloom and doom stories rolling cnbc!! Whoo hoo!


----------



## KaeJS

^ Sounds a bit risky if you ask me.

What happens if you're wrong and theres a crash, after you just maxed out your LOC and taken 20k on your MC?

You're screwed.


----------



## Argonaut

I think MikeT's clinically insane maneuver has proved that the bottom has yet to come. People aren't scared enough yet. 
If you want leverage, trade cash-backed options. Don't put up your house on the table. I mean, holy ****.


----------



## MikeT

I'm not wrong. There is no recession. The only thing that has changed recently is opinion not fact.

I have never been more sure about any trade in my entire life and I am NOT passing this one up. (and note: it's still mostly cash, I haven't seen the capitulation yet).

There will come a moment, after a particularliy bad day (probably down 800 or so), and then everything will just sit at the same price for a while as the sellers run out of stuff to sell. And things will start to look ok again.

And that's when I leverage every penny I can muster and I throw it in to my favorite stocks. And it's ok if I'm late by a day or two ... What goes down fast comes up much more slowly.


----------



## blin10

Argonaut said:


> I think MikeT's clinically insane maneuver has proved that the bottom has yet to come. People aren't scared enough yet.
> If you want leverage, trade cash-backed options. Don't put up your house on the table. I mean, holy ****.


if he buys a ton of good stocks at 6-7% yield, it will more then pay off home equity line... let's say he takes 100g's at 3.5% bank rate that's 3500$ a year interest, if he invests that 100k in 6% stocks he'll make 6000$ a year, so even after the bank fees he's still ahead... but ya he needs to be very carefull


----------



## humble_pie

_" I called Questrade to place a debit spread order to replace that call but they didn't answer after 20 minutes."_

the next stage is to trade the spreads yourself, one leg at a time. Investor will always get a better deal.

hint: i always do the more difficult side first. I am never doing any option at the natural. I'm always looking for a better deal. As soon as, on the difficult side, a counterparty appears to pay to my profitable offer, or sell to my low bid, then it's easy to zip to the other side & get that accomlished.

the reason i say investor will always get a better deal is that option desks don't have time to work spreads that are not either at the natural or else off by merely a nickel or so. Client can place orders for spreads that tend towards the mid-point but these orders will never leave the broker. The broker will not tell the client this. At most discount broker call centres, even the representatives don't know this, so they're not able to correctly inform the client.

it's a case of no one is more interested than the client; and no one will do a better job than the client.

it goes without saying that the better deals come from the liquid markets, of course. If investor is trying to obtain an advantageous price in an option with 18 or 42 open interest, he will not get it


----------



## Homerhomer

I have no problem with what MikeT is intending to do, the issue is timing and how sure he is.

First off the timing, we may or may not be near the bottom, right now the risk reward ratio for going full leverage is not worth it IMO, at S&P at 900 it will be more reasonable, I would be more comfortable doing that around S&P 600 or below.

Being so sure about what will happen is a whole different story, he may be correct but whenever I hear guarantees, or being 100% sure about what will happen in the future (there is quite a number of folks doing it on this forum) in the stock market I can only roll my eyes. You may be correct, you have about 50% chance of being right


----------



## webber22

Homer I agree. Things could fall further, so one could put in some now, then some later if things get worse - dollar value average your way down.


----------



## dogcom

Miket is right in that you go big or go home if you want to get rich fast. You are of course gambling so you have to consider that if you are wrong, your life will be ruined, so there is more then money on the table here.

Ok let us look past the guarantees as the past might suggest and look at the risks out there. The US is being downgraded and France may be next. Europe is broke and China while growing fast may not grow as fast when there trading partners are broke and they are starting to get sick of paying the US to buy there stuff. We need a to first get some kind of resolve to fix the problems of today in a real way and not just talk and kick the can down the road.

In past recessions there was resolve and things were done about the issues so the economy and stocks could move on. Also demographics were favorable in the past but are not in our favor today as many will start entering retirement age. All I am saying is that turmoil usually brings people together to do something about problems and when you see that you know the future will get better so stocks will reflect that future. We are simply not seeing any of that yet so there is still no good future at this time.


----------



## Argonaut

humble_pie said:


> the next stage is to trade the spreads yourself, one leg at a time. Investor will always get a better deal.


humble, I don't think the system will let me construct a spread by myself. Spread orders are placed through the trade desk at one commission for the pair. Anyway I don't intend to use my own money to find out. I'll just play the directional bets when need be. Thankfully gold is pulling back so the premiums will go down.

Regarding the general market. Has it formed a (volatile) base? I just don't know at this point. It would need two up-days in a row to start to look healthier. Even then, it could bring the dumb money to the table so that the smart money could hammer the market down again.


----------



## humble_pie

it's not a question of any system.

trader does one side of a spread (hint: the difficult side) as one trade all by itself. Separate from & independent of any other trade. The "spread" is still only a number in the trader's mind. Only he knows the credit or debit that he wants.

as soon as this first side is completed, a risk window opens. Trader then enters order for the other side of the spread. In the US, this might even get sent to a completely different market. The fun part is having the market run against you, or with you, during the open window period.

IB has software that permits clients to send in spread orders. But many do not, because they prefer to work their own spreads as 2 totally separate trades. I prefer to work spreads as 2 separate trades. Because i get much better prices.

other brokers do not have platforms that permit spread orders. Even if they did, i probably would not use the approach.

montreal exchange is a separate case. Sort of a basket case. It cannot accept spread orders, so clients doing montreal spreads must, perforce, stick-handle 2 separate trades. Occasionally (rarely), if they are not busy, a broker's option desk might phone mx-ca for a nickel. But best to never count on such a thing. Who ever heard of an option desk being not busy.

.


----------



## larry81

Bough more XIC yesterday


----------



## MikeT

I went to the bank and got my line of credit set up. Money is being transferred now. The house is going on the table boys and girls!

And for the doubters, keep doubting ... The lower you force the market, the more money I make. Dow 9000 baby!

And have a look at that jobs number this morning and keep telling yourself we're having a recession.


----------



## Jungle

Hey MikeT, if I can just add a suggestion, make sure you leave some room to add to your positions incase we see another 5% drop. That way you can DCA a little. 

We bought some positions too during this downturn and I am waiting for it to go lower to add some more!!


----------



## Abha

Good luck MikeT

It's never a wise idea gambling your core assets in order to play the stock market but I wish you all the best.


----------



## Homerhomer

MikeT said:


> And for the doubters, keep doubting ... The lower you force the market, the more money I make. Dow 9000 baby!
> 
> And have a look at that jobs number this morning and keep telling yourself we're having a recession.


We don't have the powers to force the market down but thank you for the complement, makes me feel important ;-)

Mike you are contradicting yourself, if the economy is in a good shape then why we would see DJ at 9000? One or the other, additional drop of 20% would be hard to achieve in good economy and decent job growth.

It will be a great move if you put all the money at the exact right time, if it continues to go down after you are out of the money I wish you luck explaining it to your wife and banker.

Good luck, you are going to need it


----------



## ddkay

Down 500, up 400, down 600, up 700. Kudos if you can decipher where this is heading. Keep in mind initial jobless claims are revised three times and usually to the upside...










Not that these numbers mean anything in isolation, the S&P500 peaked at 1373.5 on May 2, 2011 when the jobless claims were rising to the highest levels of the year.


----------



## fatcat

looks like the e-trade baby is having second thoughts and losing his breakfast over his recent trades: 










http://www.collegehumor.com/video/6477219/remix-e-trade-baby-loses-everything


----------



## Assetologist

Homerhomer said:


> .. if the economy is in a good shape then why we would see DJ at 9000? One or the other, additional drop of 20% would be hard to achieve in good economy and decent job growth.


The longer I invest in stocks the more of a temporal disconnect I see between the 'market', DJ for example, and the economy or any other macro element.

The confounding variable is humans and the computers tethered to humans.

It is this variable which I am happy to try and game for profit although I do conceed that, depending upon the period of time considered, 'the economy' will certainly affect the market and the stocks within it.

There are trades and there are investments and I believe optimal use of each is related to the influence of the human factor.
Good businesses will grow and mature (and often die) according to their unique life cycle.


----------



## Homerhomer

Assetologist said:


> The longer I invest in stocks the more of a temporal disconnect I see between the 'market', DJ for example, and the economy or any other macro element.
> 
> The confounding variable is humans and the computers tethered to humans.
> 
> It is this variable which I am happy to try and game for profit although I do conceed that, depending upon the period of time considered, 'the economy' will certainly affect the market and the stocks within it.
> 
> There are trades and there are investments and I believe optimal use of each is related to the influence of the human factor.
> Good businesses will grow and mature (and often die) according to their unique life cycle.


I am in a full agreement and that is why I used the phrase "hard to achieve" as oppose to "impossible", such disconnets, especially on the short term basis do happen, but rarely you would have a drop of 15% followed by another 20% if economy is good shape and job market drastically improving. Betting on both is most likely a loosing game.


----------



## ddkay

LOL, funny comic strip from Paul Krugman's blog


----------



## Eder

MikeT said:


> I went to the bank and got my line of credit set up. Money is being transferred now. The house is going on the table boys and girls!
> 
> And for the doubters, keep doubting ... The lower you force the market, the more money I make. Dow 9000 baby!
> 
> And have a look at that jobs number this morning and keep telling yourself we're having a recession.


One Time Baby!!! cmon 7!!


----------



## sensfan15

haha great comic!

I don't understand people dumping their positions in solid companies that pay dividends. People out there are actually dumping blue chip dividend stocks recently because of all this noise. Don't they know that if they just hold on it will be alright and the dividend will continue to roll in regardless? I don't get it.


----------



## doitnow!

sensfan15 said:


> haha great comic!
> 
> I don't understand people dumping their positions in solid companies that pay dividends. People out there are actually dumping blue chip dividend stocks recently because of all this noise. Don't they know that if they just hold on it will be alright and the dividend will continue to roll in regardless? I don't get it.


Hey, don't tell em, I am buying what they're selling.


----------



## gibor365

SPY jumps this week :
Mon -6.5%
Thu +4.65%
Wed -4.42%
Thu +4.5%
and what to expect for Friday?


----------



## blin10

sensfan15 said:


> haha great comic!
> 
> I don't understand people dumping their positions in solid companies that pay dividends. People out there are actually dumping blue chip dividend stocks recently because of all this noise. Don't they know that if they just hold on it will be alright and the dividend will continue to roll in regardless? I don't get it.


if somebody bought 1000 shares of Royal Bank at 61 they would be down $10g's already, so the dividend will not save anyone if market stays down... let's say we go to a double dip recession and RY slides to $30 again, they'll be down $31g's on paper... most people don't have millions where they can afford to be down 10-30g's for years waiting for it to come back


----------



## ddkay

I don't remember a time banning short selling was a plus for the markets...

The press release: http://www.amf-france.org/documents/general/10108_1.pdf



> The President of the Financial Markets Authority, acting under Article L. 421-16 II of the
> Monetary and Financial Code, decided to ban any net short position or any increase of such
> existing position, including during the day, by any person established or resident in France or
> abroad, the shares or providing access to capital for credit institutions and enterprises
> insurance include:
> - April Group
> - Axa
> - BNP Paribas
> - CIC
> - CNP Assurances
> - Crédit Agricole
> - Euler Hermes
> - Natixis
> - Paris Re
> - Scor
> - Société Générale
> This applies as soon as posted on the website of the AMF that day at 22:45 and for a
> fifteen-day period. It may be extended under the conditions of Article L. 421-16 II above.
> It does not apply to financial intermediaries acting as market maker or
> liquidity provider signed a contract with the market operator or issuer, or
> as principal of blocks of shares.
> The AMF will publish a list of questions and answers on the implementation of this decision.


----------



## sensfan15

@blin

I suppose RY may never go back up to 61...but if your an investor in it for the next 20 years and not a trader I would not be concerned. But then again it is possible it will never be at 61 again. In any case I would rather have that money in a solid bank such as RBC than sitting underneath my mattress.


----------



## blin10

sensfan15 said:


> @blin
> 
> I suppose RY may never go back up to 61...but if your an investor in it for the next 20 years and not a trader I would not be concerned. But then again it is possible it will never be at 61 again. In any case I would rather have that money in a solid bank such as RBC than sitting underneath my mattress.


in 20 years anything can change in life and you might need money.... plus 20 years is a long time, that's like 1/3 of your entire life if you lucky to make it to 60's+ (most people don't invest when they're 0-25, I bet most investors are in their 30's+ who got money).... look at BMO, it still didn't recover to 2006 highs and I bet those people who invested alot lost a couple years of their life watching their stock going so low (and at that time bankruptcy wasn't off the table either)... why go through all that when you can chill out and pick it up lower? we all know banks aren't ganna double in price anytime soon


----------



## gibor365

blin10 said:


> why go through all that when you can chill out and pick it up lower? we all know banks aren't ganna double in price anytime soon


and how do you know when is "lower"?  was it low at 56 in June ?(and ppl from this forum bought it than) or is it low now?


----------



## blin10

gibor said:


> and how do you know when is "lower"?  was it low at 56 in June ?(and ppl from this forum bought it than) or is it low now?


what I ment to say, to pick it up more shares lower, you can initiate you position and the lower it goes the more you pick up... but overall market broke a major monthly uptrend so unless it gets back there fast it does not look good...


----------



## ddkay

It's reasonable to "leg in" positions, add back maybe 1 or 2% of your portfolio very gradually as the market makes new lower highs and lower lows. Buying the dips is fine _if_ you do it cautiously and have cheap commissions, but borrowing to invest and going gung ho while the market is in indecisive mode and swinging hundreds of points a day is generally not a friendly environment for investors or inexperienced traders. The E-mini S&P500 Futures are -1.55% now.


----------



## KaeJS

KaeJS said:


> I am almost contemplating on whether or not I should be purchasing dividend payers in order to take advantage of my youth and compound interest, as opposed to risky shorter term swing trading.
> 
> Like I've said in a few posts now;
> 
> CPG is yieling 7%, BMO 5%, REI.UN 6ish%, SLF 6ish%, BCE ~5.5%, TRP 4.3%
> 
> ^ Oh, and would you look at that, we have Energy, Financials, Real Estate, Telecom, Transportation
> 
> Sounds good to me...
> 
> And we all know CPG will be over 45 again, BMO will be over 60 again, REI over 25 again, SLF over 28 again
> (BCE is a little on the higher side)


And in regards to my previous post above, that is exactly what I did today, minus the BMO/TD shares. (Purchased 10 AAPL instead!)


----------



## Argonaut

Pretty good looking portfolio, though I never understood your obsession with perfect-lot shares. Are you off margin now?


----------



## KaeJS

Argonaut said:


> Pretty good looking portfolio, though I never understood your obsession with perfect-lot shares. Are you off margin now?


I am off margin for the most part. I am borrowing a small amount, but the market would need to crash 95% for me to get a margin call.

And, gotta have perfect lot shares. Makes it so much easier to calculate.

I always trade in multiples of 25, 50, 100, and in the case of AAPL since it's so expensive; 10.


----------



## Banalanal

http://online.wsj.com/video/roubini...3E2F8735.html?mod=WSJ_Markets_VideoCarousel_1

Interesting video by Roubini, negative outlook. More and more respected economists are predicting bad things. Considering selling a 1/3 of my port to have more liquidity for what comes. Worst case scenario I get reinvested in the fall when the world doesn't end. How concerned are you? If anyone could make some general predictions on inflation/deflation issues that could arise in the not too distant future, I'd be interested to hear as well.


----------



## ddkay

I think next year more people are going to sell in May and go away...


----------



## HaroldCrump

ddkay said:


> I think next year more people are going to sell in May and go away...


As fate would have it, chances are, next year the crash won't happen in July/August.
It will happen in Oct/Nov like 2008, just when everyone would have gotten back into the market.


----------



## Belguy

On CNBC today, they blamed a lot of the current market volatility on "investor speculators" playing the market.

However, that would not apply to anyone on this forum I am sure.

---I think that we either hit the bottom this week or maybe not.


----------



## ddkay

It's all one big experiment. If there was only one way to play the market far fewer would win. The speculators generally keep the prices in check, e.g. by calling Gold a bubble based on zero interest rate policy they'll short the spikes or create a synthetic short or buy LEAPS put options. We're not in normal conditions anymore. Volume fell off a cliff, the volatility is a result of far fewer market participants. I heard now most European exchanges have banned short selling until the end of August, European short sellers would move almost exclusively to North American markets instead, so that may be positive and add stability.


----------



## KaeJS

I didn't even know that they could ban short selling....


----------



## Argonaut

August 26th: European short selling ban ends, and Ben Bernanke makes his Jackson Hole speech. 

Coincidentally this is also the day I come back from a 10 day vacation!


----------



## el oro

A few pages upthread the "death cross" in the S&P (and other markets) was mentioned as a concern. It is explicitly defined as the 50 day moving average crossing over the 200 day moving average. I just wanted to illustrate that it is useless as a standalone indicator as shown below. It's supposed to indicate a bear market underway. The last one occurred in 2010 and it nailed the bottom of the year.


----------



## ddkay

Those death crosses on the regular indices are lagging indicators, it would just confirm the crazy drops we had from June till present, look at $NYA200R. A bear market from the definitions I've looked at is -20% from the peaks. We're only half way there.


----------



## ddkay

French GDP numbers came in this morning stagnant at 0.00%. Most of the rest of the world has entered the bear market. We're in better shape than most countries but chances are we'll follow their path into a recession.










Credit to Michael McDonough (Bloomberg BRIEF)


----------



## kcowan

Just checking in. Has anyone made money this week?


----------



## the-royal-mail

I have not but I am very surprised at the huge increases I enjoyed on at least two different days this week. Like one fund was up 4.48% in a single day. I don't think I've seen such a huge single-day increase in at least a year, and it happened 2-3 times in a week!

But no, I've still lost a lot of money in the grand scheme of things.

Factors are investor confidence in the markets, bargain hunters and market timers. People have money to invest, otherwise they wouldn't be buying bargains and pushing up the prices.


----------



## gibor365

It's not really matters if you gain in one week, 1 day or 1 hour.... I just know that this year I switched from Mutual funds to stocks and ETF and YTD I'm down  
Just hope that this is temporarily as I buy equites only for registered accounts and TFSA and won't need this money at least 10 years


----------



## Belguy

The system is not working very well for small investors. Here is a letter to the editor from today's Toronto Star:

I'm highly skeptical of what is happening on the stock market these days. I can't help but feel that there are some very wealthy players who are manipulating the prices, who are currently buying at low prices and getting ready to sell at a huge profit when they create the conditions of a recovery.

It is all self-serving and unadulterated greed, of course. It's a shame that a few very wealthy individuals can so manipulate the world economy and is just further proof that unfettered capitalism simply does not work for the majority.

--Stephen L. Bloom, Toronto

Do you feel that there is anything to what he is saying?


----------



## Yudansha

Stocks almost gained back losses for the week. Volitility starting to drop. Are you guys starting some long positions? 

I've just dipped my toes in, bought a little bit of UPRO.


----------



## humble_pie

took in 3100 trading US puts including the lonesome goog this am.

blew it all & more buying more tuscany. This unknown new driller is weak on nervousness over the 8 rigs in africa. However majority of rigs are in south america.


----------



## Argonaut

S&P actually up 10 points since market open on Monday. Something smells fishy. When short selling is being banned in Europe, there must be something wrong or else why bother?


----------



## CanadianCapitalist

Now that the markets have bounced back, it may be an opportunity for those investors on this board who were spooked by the steep one day losses to reducing their portfolio risk level.

They may want to do the following exercise. For their stock portion imagine if every one of them dropped 50% in price. Total it up and add to the bond portion. If the portfolio declines that much in value, would you hold on? If the answer is no, consider selling stocks down to the point to which you think you'll manage to hold on.


----------



## ddkay

Nope, still rolling sideways


----------



## Plugging Along

^ Great suggestion. That's my FA did during the last crash, and it really helped me confirm my risk tolerance.

I know I'm fairly risk tolerant, as I've been buying away.


----------



## Belguy

After a tumultuous week, the markets may have rebounded but the problems remain.

Consumer confidence is now measured as the lowest since 1980 when Jimmy Carter was President! How can the markets perform well when consumer confidence is at such a low level!!

A free dental clinic was held at an Atlanta church today. Much to the astonishment of the organizers, FOUR THOUSAND people showed up many of whom had dental insurance with their employer until they were laid off. These people never ever thought that they would require free dental care having been used to having some kind of coverage in the past. 

No wonder that Mexican immigrants are returning to Mexico in droves because there are more job opportunities in Mexico than in the U.S.!!!

And Europe is still going to hell in a hand basket and it is only a matter of time until the first European country defaults on it's debt. When that happens, the stock markets will tank again.

Put a lot of thought into what target asset allocation you wish to have in these ongoing scary times. Protect your hard-earned savings!!


----------



## Assetologist

*My spew about that.......... take it or leave it*

"Each problem has hidden in it an opportunity so powerful that it literally dwarfs the problem. The greatest success stories were created by people who recognized a problem a turned it into an opportunity." Joseph Sugarman 

Spend eighty percent of your time focusing on the opportunities of tomorrow rather than the problems of yesterday. 
Brian Tracy 

"In the middle of difficulty lies opportunity." Albert Einstein 

"A wise man will make more opportunities than he finds." Francois Bacon 

"Opportunity?often it comes in the form of misfortune, or temporary defeat." 
Napoleon Hill 

"Opportunities? They are all around us?there is power lying latent everywhere waiting for the observant eye to discover it." Orison Swett Marden 

"Small opportunities are often the beginning of great enterprises." Demosthenes 

"We are continually faced by great opportunities brilliantly disguised as insoluble problems." Anonymous 

"A man who misses his opportunity, and monkey who misses his branch, cannot be saved."
Hindu Proverb 

"Four things come not back: The spoken word, The sped arrow, The past life, The neglected opportunity."Arabian Proverb 

"If God shuts one door, He opens another."Irish 

"Teachers open the doors, but you must enter by yourself.Chinese Proverb 

"Even when opportunity knocks, a man still has to get up off his seat and open the door."Anonymous 

"For every problem there is an opportunity."Anonymous


----------



## zylon

Here's how I see the next opportunity unfolding. 
And if perchance I'm proved to be wrong, 
and it's "to the moon, Alice" - then I'll have cash waiting for next time.


----------



## Belguy

Because of my age, I am going to change my asset allocation from 60% equities/40% bonds to 50/50.

In these uncertain times, that will allow me to sleep better. If I had a longer time horizon, I would probably keep things the way that they are.

50 per cent equities is still quite aggressive for an older guy like me.

This will be the first time that I have adjusted my asset allocation in many years. I want to be more balanced when the first European country goes under.


----------



## sags

The downturn is bad Belguy......real bad.

Not gentle like before..............but bad.


----------



## Abha

So much doom and gloom.

If I was a beginner and I was reading the posts as of late I'd be petrified.

The reality is, the market will go higher and while it may feel like a roller coaster, just go back and look at 5, 10, 20, 25, 30 year performance time frames with respect to different strategies (ETF's, dividends, bonds, indexes, emerging markets etc.)

It doesn't matter what you choose; stocks, bonds, GIC's the fact is that, proper asset allocation and risk management and you will make money.

Don't like to take risk, then buy the big caps that will almost never go away. Proctor & Gamble, Suncor, Exxon, BCE etc.

Don't even want to risk buying those equities....then stick to corporate bonds and GIC's, and you'll see modest gains.


----------



## Argonaut

Abha said:


> Suncor


To quote Gordon Gekko, Suncor is a dog with fleas. Can't believe it was briefly on my watchlist. CN Rail is the best defensive name in Canada.


----------



## dentist101

i was thinking back to earlier in this thread (maybe around early june) when i was really nervous, wondering if i had done something stupid with putting my $$$ into the market. one poster kinda ticked me off when he replied by saying that i couldn't have picked a worse time that then (early may when markets were doing great). i thought to myself, "thanks, captain obvious!", as it was easy to see in hindsight. since then, i have been kinda kicking myself for putting my $$$ in then, and regretting it and worrying about the future. 

...then it hit me... it was actually the best thing that could have happened to me! this volatility was a blessing in disguise! i took $100k and put it in the equities and bonds. when things got rocky (early july ) and i saw the ups and downs starting, i waited until the markets rose a bit again and i decided that i felt more comfortable with only having half of that exposed to the market (and took out half and dumped it in a GIC). so, right now i'm down 2.5% (notice i said DOWN, not that i LOST, ha!). big deal, i'm in for the long haul! 

today, i'm at peace for the first time in a while, and it took these past few months to really help me assess my risk tolerance and see how the markets really can work. if all i'd ever known was the bull market, then i'd really never know what my true risk tolerance was, and could end up making stupid mistakes and rash decisions in the future. 

i admit that watching the markets (which i'm trying not to do as much now) over the past few months has been a bit stressful, but a great learning experience. i really want to say thanks to all the posters here for this thread...i've learned sooooo much!!! 

i'm starting to be a bit less emotional regarding $$$, and this has opened my eyes to the financial world greatly. i hope things are going to turn around, but if they don't, my outlook on finances is far better than it was when i first came on here.

cheers!


----------



## Abha

Argonaut said:


> To quote Gordon Gekko, Suncor is a dog with fleas. Can't believe it was briefly on my watchlist. CN Rail is the best defensive name in Canada.


I'm not a fan either, but I think its a fair certainty that Suncor will outlive both you and I.


----------



## Belguy

I was just looking at a chart of TSX monthly closes since March of 2008. At that time, the TSX closed at around 13,000.

Yesterday's close was 12,542.

Almost 3 1/2 YEARS of no net gain!!

Not only that, but your money would have gained SOMETHING in fixed income investments over that time period and so investors in the TSX index would actually be in the hole!!

So much for being rewarded for taking on added risk!!

What will the next 3 1/2 years look like if one or more European countries goes under??

Some of us are running out of time--and faith!!

Buy, hold, and prosper???????????


----------



## Eder

Belguy said:


> Not only that, but your money would have gained SOMETHING in fixed income investments over that time period and so investors in the TSX index would actually be in the hole!!



I dunno...my XIU yields around 2.5% over that time so you need to take that into consideration...

the fact that dividends account for well over half of stock market returns should never be omitted...


----------



## Assetologist

Many blue chip dividend stocks grew their dividends through all the turmoil as they have through uncertain times before.

Owners of these investments can take comfort in the steady, increasing payments year in and year out and that is, truly, money in your pocket.


----------



## Belguy

Well, OK then--no capital gain by investing in the index over the past 3 1/2 years and the next few months and years could be just as shaky because it does not look like boom times ahead--unless maybe Americans get rid of Obama who has been a disaster!!!


----------



## Abha

Belguy said:


> Well, OK then--no capital gain by investing in the index over the past 3 1/2 years and the next few months and years could be just as shaky because it does not look like boom times ahead--unless maybe Americans get rid of Obama who has been a disaster!!!


Despite your fears, I lump you into the pro category on these forums. Not only have you never panicked during the market gyrations you have exhibited a very sound and prudent approach to investing and through all this you have realized that you have too much skin in the game in terms of the balance between equities and fixed income instruments. 

Drink a beer and know that you are far ahead of the vast majority of people out there.


----------



## Jon_Snow

You are fooling yourself if you think a Republican president would have made one bit of difference.

Remember W? Could be (and has been) argued that he helped get this ugly ball rolling.


----------



## HaroldCrump

Belguy said:


> I was just looking at a chart of TSX monthly closes since March of 2008. At that time, the TSX closed at around 13,000.
> 
> Yesterday's close was 12,542.
> 
> Almost 3 1/2 YEARS of no net gain!!


On what basis are you picking March 2008, when the TSX was poised for a huge upswing?
If I recall, TSX kept going up through the spring and peaked over 15,000 early summer.
Why not pick March 2009 for comparison?


----------



## Belguy

This snapshot titled 'Riding out the financial crisis' was from today's Toronto Star. It charts the TSX monthly close from the Bear Stearns takeover in March 2008 up until the S&P's downgrade of U.S. debt and up until yesterday's close of 12,542.

It's essentially a long roller coaster ride that brought us back to more or less exactly where we started approximately 3 1/2 YEARS (not weeks or months but years!!) ago.

This could end up being many years of precious little gains. Some have suggested that it could last for the next 40 years!!!


----------



## Abha

Belguy said:


> This snapshot titled 'Riding out the financial crisis' was from today's Toronto Star. It charts the TSX monthly close from the Bear Stearns takeover in March 2008 up until the S&P's downgrade of U.S. debt and up until yesterday's close of 12,542.
> 
> It's essentially a wide roller coaster ride that brought us back to more or less exactly where we started approximately 3 1/2 YEARS (not weeks or months but years!!) ago.
> 
> This could end up being many years of precious little gains. Some have suggested that it could last for the next 40 years!!!


40 years of little to no GDP growth worldwide? I doubt that very much. Imagine all the scientific and technological breakthroughs that will occur in this decade.

Also with populations booming around the World (just not in developed countries) I imagine that commodities, transportation and service industries will chug right along.


----------



## KaeJS

Suncor is not a dog with fleas, but it is not a "buy and holder". Suncor is a trading stock.

And yes, in the words of *Abha*; Drink a Beer. (as I am currently doing, right now. It compliments my pipe quite nicely. )


----------



## Causalien

dentist101 said:


> i was thinking back to earlier in this thread (maybe around early june) when i was really nervous, wondering if i had done something stupid with putting my $$$ into the market. one poster kinda ticked me off when he replied by saying that i couldn't have picked a worse time that then (early may when markets were doing great). i thought to myself, "thanks, captain obvious!", as it was easy to see in hindsight. since then, i have been kinda kicking myself for putting my $$$ in then, and regretting it and worrying about the future.
> 
> ...then it hit me... it was actually the best thing that could have happened to me! this volatility was a blessing in disguise! i took $100k and put it in the equities and bonds. when things got rocky (early july ) and i saw the ups and downs starting, i waited until the markets rose a bit again and i decided that i felt more comfortable with only having half of that exposed to the market (and took out half and dumped it in a GIC). so, right now i'm down 2.5% (notice i said DOWN, not that i LOST, ha!). big deal, i'm in for the long haul!
> 
> today, i'm at peace for the first time in a while, and it took these past few months to really help me assess my risk tolerance and see how the markets really can work. if all i'd ever known was the bull market, then i'd really never know what my true risk tolerance was, and could end up making stupid mistakes and rash decisions in the future.
> 
> i admit that watching the markets (which i'm trying not to do as much now) over the past few months has been a bit stressful, but a great learning experience. i really want to say thanks to all the posters here for this thread...i've learned sooooo much!!!
> 
> i'm starting to be a bit less emotional regarding $$$, and this has opened my eyes to the financial world greatly. i hope things are going to turn around, but if they don't, my outlook on finances is far better than it was when i first came on here.
> 
> cheers!


This is the reason why I stopped telling people to buy or sell, unless they are about to make a huge mistake like Argo's Lulu. If only all newbies are as upstanding as you.


----------



## Argonaut

Causalien said:


> This is the reason why I stopped telling people to buy or sell, unless they are about to make a huge mistake like Argo's Lulu. If only all newbies are as upstanding as you.


I had sold out of that trade obviously, and made some better ones. But we'll see, it could have ended up being a good trade. Lulu on a bit of a roll. I'll check the price again when they report earnings.


----------



## gibor365

I've read some opinions that S&P gonna go up to resistance level of 1260 and than gonna be big sell off.... maybe to add VTI now


----------



## larry81

to the doom and gloom crowd, how do you like the rebound so far ?


----------



## ddkay

It's a news driven market, there was no significant news today besides Google buying Motorola Mobility (party time?). I'm waiting for Europe to fall on its face tomorrow after Merkel's and Sarkozy's comments


----------



## Causalien

larry81 said:


> to the doom and gloom crowd, how do you like the rebound so far ?


Not liking it. I only made $1000 from my early TSLA buy. Was waiting for it to fall more with a lot of cash. On the other hand, there's now plenty of opportunity to print cash with neutral strategies. Will be busy deploying them this month. 50% now, 50% after Jacksonhole


----------



## gibor365

ddkay said:


> It's a news driven market, there was no significant news today besides Google buying Motorola Mobility (party time?). I'm waiting for Europe to fall on its face tomorrow after Merkel's and Sarkozy's comments


Are you shorting Europe?


----------



## Belguy

It can sometimes be a rocky and rolly journey to the bottom of the rollercoaster ride.

The underlying problems have not gone away. The world is still in a financial mess.


----------



## Causalien

Think people. Le Bernanke just pledged 0% interest rate for 2 years. Think of all the opportunities that you have not realized is out there.


----------



## KaeJS

gibor said:


> Are you shorting Europe?


Apparently nobody is anymore....

Hahaha 

And, I think the doom and gloom is mostly over. We avoided default, we were already downgraded, Greece got their package, interest rates at 0 forever and ever.

All we have to worry about is a little bit of Europe. I don't think we are going to see another huge sell off unless something drastic affects the US economy.

Companies are *still making profit*

Yes, the market buys and sells on emotion sometimes, but it will always revert back to the mean.


----------



## Belguy

Try to be positive when the first European country defaults on it's debt!


----------



## ddkay

Italy was closed for holiday today and the EU short selling ban announced Friday + options expiration week could push the market higher. The wild card here is the dialogue between France and Germany tomorrow.. no positions.


----------



## KaeJS

ddkay said:


> The wild card here is the dialogue between France and Germany tomorrow.. no positions.


I really don't think F&G will allow **** to hit the fan...

It will all be okay.


----------



## Belguy

Germany will want a lot in return like taking over virtual leadership of the European union.

It took them a while, but maybe they will end up winning WWII in the long run and rule Europe, at least economically speaking.


----------



## KaeJS

Yes, but I mean, rightfully so.

The Germans are not stupid, and they have already helped enough, if you ask me. If they continue to help, then they should be owed greatly - one way or another.


----------



## gibor365

Belguy said:


> Germany will want a lot in return like taking over virtual leadership of the European union.
> 
> It took them a while, but maybe they will end up winning WWII in the long run and rule Europe, at least economically speaking.


As I said many times. Germany will do everything in order keep union and euro. They are building 4th Reich economically, not military....


----------



## Belguy

And the generally hard working German people are not going to foot the bill for people who don't want to work or pay their taxes. They are going to demand a great many concessions from societies that think the world owes them a living.

We are entering a brave new world where social entitlements will start to take a back seat to fiscal reality.

In Canada, the core entitlement that I support is a health care system tailored to an aging population but it will not come cheap. The first step is to extract much of the waste out of the system and spend it instead on front line services.


----------



## sags

It isn't just the lenders who need to be convinced.

The citizens have to accept austerity measures, and there is no indication they will for a couple of reasons.

First, they don't believe it is their problem to solve. They believe the crisis was caused by greedy bankers and corrupt politicians. They believe the lending and austerity measures are another example of exploitation.

Secondly, if living through the austerity measures is worse than living through a default..............why not default? To save the above mentioned bankers?

Lastly, accepting a bailout and austerity measures, means a loss of sovereigty and the probability of decades of economic hardship. A default may be easier to cope with.

We will see if the civil unrest in England spreads across Europe.


----------



## ddkay

Germany Q2 GDP came in at 0.1% this morning while expectations were 0.5%, and France is expected to revise down their growth forecast.

In a few hours the two will tell us how they'll get their books in order without crippling the recovery...


----------



## Yudansha

I wonder how the markets will take that news. 

Good read: http://www.bbc.co.uk/news/business-14539502


----------



## ddkay

On July 29 The Smurfs rang the opening bell at the NYSE. Today a beaver rang the bell at the TSX.. what does it mean?


----------



## ddkay

Minimal damage to the S&P today despite the bad news from Merkozy... think we'll keep levitating up until Friday following the regular pattern for monthly options expiration.


----------



## Argonaut

Market probably should have dropped 2-3% on the German GDP numbers. Most signs point to another recession, or a continuation of one. The market has no business being up since the S&P downgrade.

I don't know why I'm being such a bear cheerleader, but it is what it is.


----------



## ddkay

Until a default happens and some institution like SocGen blows up I think it's going to be a slow and painful move down. We still don't know the real reason behind the crash on August 4. I don't think it was the credit downgrades... Remember in January 2008, a few weeks after Bear posted their first quarterly loss and the market was dropping, a rogue trader at SocGen lost $7.4B to a bullish bet on Euro futures... I think something like that might have happened, but until the news is out there's too much fear/uncertainty.


----------



## gibor365

Interesting what we'll see this week...so far it reminds last week' seesaw with lower magnitude


----------



## Belguy

Many years of painfully slow growth going forward means many years of poor market returns.

Buy, hold, but don't expect to prosper much.


----------



## KaeJS

Belguy said:


> Many years of painfully slow growth going forward means many years of poor market returns.
> 
> Buy, hold, but don't expect to prosper much.


Compounding FTW!


----------



## peterboro31

Don't diss Belguy for he is a BAMF


----------



## Belguy

BAMF? Is that a good thing?


----------



## KaeJS

Bright, Articulate, Man of Fortune?


----------



## Belguy

Thoughts from this evening's TV viewing:

German growth is stalling. Europe is on the brink. The risks are serious.

At French/German summit meeting today, the markets were looking for quick solutions but all that they got were proposals. The markets reacted with disappointment and continued fear.

Confidence in the world economy is in very short supply.

There is fear of contagion--that the European debt crisis can't be contained.

The solution with the most potential is the orderly splitting up of the Euro zone. 

Greece should not exist!

It is the best of times and the worst of times!!

You may be living in the only oasis of stability in the world today--your Canadian home. It is certainly much more stable than are the world's financial markets!!


----------



## Assetologist

Remember Chicken Little?


----------



## KaeJS

lol....

I know what BAMF is now...


----------



## ddkay

The market is heavily overbought and there's a rising wedge on the cash s&p. If it closes above 1208, today is the top, and if it closes close/above 1200, tomorrow is the top. I'm bearish going into next week I think we'll retest the August 8 lows, looking to short some US financials starting Monday.


----------



## Causalien

Who's betting that SocGen is going to fail à la Lehman style?


----------



## blin10

ddkay said:


> The market is heavily overbought and there's a rising wedge on the cash s&p. If it closes above 1208, today is the top, and if it closes close/above 1200, tomorrow is the top. I'm bearish going into next week I think we'll retest the August 8 lows, looking to short some US financials starting Monday.


man this is a reason people should read these posts just as entertainment... market is heavily overbought? it went off a cliff, this is just a small bounce... and if it closes above 1208 that a bullish pattern not bearish... you waiting to short usa financials? you're too late to the party, go look at the BANK index it's sitting close to 2009 crash lows, you going to short THAT ?


----------



## ddkay

Yeah it's a small bounce gap filling within a range... 110 points from 1104 - 1214. We're near the top now. More financials will fail because of euro contagion, so yes there is more downside.


----------



## blin10

ddkay said:


> Yeah it's a small bounce gap filling within a range... 110 points from 1104 - 1214. We're near the top now. More financials will fail because of euro contagion, so yes there is more downside.


i never said there is no downside, I think there is one too, i'm just pointing out flaws in what you said....


----------



## Causalien

I won't bet on any side until Jackson hole, the risk of a short squeeze while that overhang is only 9 days away is too great.


----------



## Argonaut

I'm making a short bet for tomorrow. On deck are jobless claims, CPI, home sales, and Philadelphia Fed Survey. Bound to be some bad news in there somewhere. I have to make up for a couple of really dumb trades I made today. Thankfully, the dollar numbers involved are small in either case.


----------



## ddkay

Jackson Hole is on everyone's calendar for sure, that could be a potential bottom.

S&P500 is closing close to my 1200 target (1194), so my plan hasn't changed. I expect a retest of the todays highs tomorrow, then consider positioning myself for a strong move down. The worst will likely come next week after the monthly options expiration date which is Friday.


----------



## Yudansha

Argonaut said:


> I'm making a short bet for tomorrow. On deck are jobless claims, CPI, home sales, and Philadelphia Fed Survey. Bound to be some bad news in there somewhere. I have to make up for a couple of really dumb trades I made today. Thankfully, the dollar numbers involved are small in either case.


Gonna have to agree. I also made a few bad trades, figured the market would have more downside. Pleasantly surprised to see the aftermarket trades go my way. Large TVIX turnaround in the last few minutes. 

Should be interesting tomorrow to say the least. Good luck everyone.


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## Belguy

The greatest nation on earth is able to borrow enough money to fight two consecutive wars in far off lands and yet, the latest figures on U.S. child poverty, just released, shows a deepening problem:

1 in 5 American children, or 14.7 small souls, are now living below the poverty line.

1 in 3, or 23 million children now have neither parent with a job.

Most of these children will never graduate from high school let along go on to university or college. The ripple effect will last for years and maybe generations.

This only adds to the growing economic uncertainty with our prime trading partner. How much longer can Canada remain seemingly immune from more problems with our economy?

By the way, how are your stocks doing?


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## gibor365

Belguy said:


> By the way, how are your stocks doing?


Can be better


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## ddkay

It's comfortable knowing economics is only valid half of the time, right. If we knew how to cure the US/EMU sovereign debt issues overnight they would have been cured already. I would never think of long term investing in this environment. Systemic inefficiencies have grown so large IMO they can't be fixed by another $600B round of stimulus. Unless I can make an obvious trade, I won't. You usually have to pay for insurance.. I'm happy to be overweight in cash and pay that price in inflation, whatever it may be.


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## Causalien

On one hand, I am looking forward to QE3 after jackson hole. On the other, the already pledge 0% interest for 2 year is going to wreck havoc to my home tax. Rent is not increasing.


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## KaeJS

Causalien said:


> On one hand, *I am looking forward to QE3 after jackson hole.* On the other, the already pledge 0% interest for 2 year is going to wreck havoc to my home tax. Rent is not increasing.


I'm glad you said it and not me.


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## Causalien

Someone should start a "Predict Vancouver house price" contest after 2 more years of 0% interest. Are we going to see 3 million average price?


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## ddkay

Ok new thesis.. yesterdays 1206.75 was the top. Lookout below.


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## Argonaut

Sittin' pretty with a GLD call and shares in S&P Ultra Bear x3. I should have hung on to S&P put but August 20th was fast approaching so I bailed. Oh well. Knew we were due for a selloff.


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## webber22

NYSE invokes Rule 48 on volatile open, Belguy better go back to the garden today


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## ddkay

Reuters journalist: Reuters cites "gov official" on 2nd Greek bailout cancellation. I am learning this is a Greek government source.

Finland was insisting Greece gave them collateral, wouldn't agree to unsecured loans.

*** RTRS: Finnish finmin says Finland will cut spending by €1.16bln next year, and will raise taxes by €1.1bln in next year's budget


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## Argonaut

So what is the play for Jackson Hole? QE3 would be a disaster, but Ben loves to increase the money supply. I think we're looking at stagflation, and the only real play on that is gold.


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## Belguy

Worldwide economic gloom!!


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## Causalien

Flattening of long term yield is most likely. We are going to see Japan's lost two decade play out in US. It's a safe play, since whatever happens to the experiment, we'll have 20 years of warning.


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## marina628

Can't see many people learning their lessons.I have a friend who bought a house in usa this week and he is actually getting $7000 cash on closing from seller.House needs work so they jacked sell price to $165,000 and my friend is paying $148,000 ,my friend put the 10k cash into sellers hand to do the work and my friend is getting 17k back on close effectively putting nothing into the house except $1200 for some tax acct.


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## Mockingbird

CanadianCapitalist said:


> Now that the markets have bounced back, it may be an opportunity for those investors on this board who were spooked by the steep one day losses to reducing their portfolio risk level.
> 
> They may want to do the following exercise. For their stock portion imagine if every one of them dropped 50% in price. Total it up and add to the bond portion. If the portfolio declines that much in value, would you hold on? If the answer is no, consider selling stocks down to the point to which you think you'll manage to hold on.


I don't think many listened to your advice, CC.

MB


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## Belguy

This market is for traders and not for long term investors.


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## Argonaut

Take a look at the options action on Bank of America today. November put @ 4.00 strike.

http://www.nasdaq.com/aspxcontent/options2.aspx?symbol=BAC&selected=BAC&qm_page=80326&qm_symbol=BAC

$2 million bet on Bank of America dropping by at least 50% in the next three months. The bet is literally insane. Reeks of John Paulson trying to make up for his boneheaded investing skills this year.


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## blin10

Argonaut said:


> Take a look at the options action on Bank of America today. November put @ 4.00 strike.
> 
> http://www.nasdaq.com/aspxcontent/options2.aspx?symbol=BAC&selected=BAC&qm_page=80326&qm_symbol=BAC
> 
> $2 million bet on Bank of America dropping by at least 50% in the next three months. The bet is literally insane. Reeks of John Paulson trying to make up for his boneheaded investing skills this year.


$2mill bet is nothing for bac and doesn't mean anything...


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## Argonaut

blin, when have you ever contributed anything? If you disagree with someone, please bring up some facts and logical counterarguments as to why.


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## blin10

Argonaut said:


> blin, when have you ever contributed anything? If you disagree with someone, please bring up some facts and logical counterarguments as to why.


why ? because daily volume on bac is over 240mill shares, that's I believe 1.7billion worth of shares exchanges hands EVERY day based on $7 a share... I know options are a little different but I'm trying for you to understand how 2mill bet is a drop in a backet of water... there are a ton of bets way over 2mill in both directions (up or down) ...


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## Argonaut

Volume on that put was over 70,000 contracts today, 14x that of the 5.00 strike price. Hardly a drop in the bucket. And with options the risk is there to lose every penny. But it looks like most of the position was liquidated by the end of the day. They probably didn't make much money; BAC actually held its ground after the initial drop. And if you're the only one buying, then selling big numbers, liquidity is not on your side.


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## fatcat

argo, the banking sector is in serious trouble ...
who knows what bac has on its books ?
it is trying to dump its share in a chinese bank and just sold its credit card business in canada
something is up, they are trying to raise cash everywhere they can


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## Argonaut

I'm bearish on the banks too, but in the money puts would be safer. BAC has to drop a lot for the 4.00 strike price to beat higher strike prices.


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## Abha

BAC is not going anywhere. This dog will be back to $10 in a few years time.


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## Causalien

BAC has 10 billion shares... $2 million dollars is irrelevant. In fact, I doubt there's anything more damaging than John Paulson dumping all his shares, which has already happened.

Other than that. The sell of asset could be what zero hedge suspected. That there's some unplanned liability event. In which case, they will go down in flames taking North America with it. I doubt the living will provision has been fully implemented. On the other hand, they did say they are increasing capital to reach that 9.5% basel 3 requirement.

The true tell tale sign will be when some bank in America tap the liquidity swap with Fed. There's no use speculating until that happens. 

What $6 for BAC says is that this bank is as bad as it was in 2009. I don't buy it though since they've shed so much crap. Especially the MBNA card business.


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## humble_pie

argo a party taking up or selling options in that quantity is not making a simple bet. The volume of puts you noticed is likely only part of a formation that no one can see. A quadruple formation or some kind of stock/option combo. It's highly unlikely that it's any kind of simplistic shot at $4 BAC by november.


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## Argonaut

Wow, look at the chart for the S&P today. It's like a child drawing really jagged mountains. If that doesn't say we have a broken market I don't know what does. Banning short selling is silly, but they should look into banning HFT. I don't know what effect it would have on liquidity and options and things, but it would be nice knowing the guy on the other end of the trade is a **** sapien.


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## Yudansha

Huge swings in either direction. Very volatile. I think I am gonna sit today out.


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## gibor365

_"On Thursday, for example, the German DAX plunged 4% due to an unknown source of heavy selling. U.S. markets then followed in their later opening, a terrible manufacturing survey adding to the gloom."_


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## ddkay

AlphaFlash®
The fastest machine-readable economic and 
corporate news

http://deutsche-boerse.com/dbag/dis...mation_products/10_spot_market/AlphaFlash.pdf

Lol, with all the darkpools like Sigma-X being created HFT are the main exchanges bread and butter


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## gibor365

Causalien said:


> BAC has 10 billion shares... $2 million dollars is irrelevant. In fact, I doubt there's anything more damaging than John Paulson dumping all his shares, which has already happened.
> 
> What $6 for BAC says is that this bank is as bad as it was in 2009. I don't buy it though since they've shed so much crap. Especially the MBNA card business.


What do you think about JPM? I hold some small amount of shares .... don't know stop losses and get out or it has some potential


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## Belguy

In these markets, the haves can suddenly become have nots in a flip of a coin!!


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## el oro

You worry too much Belguy. If this is anything like 1929, the markets will just test the 2009 low, fall 75% from there in 2.5 years and then you're in the clear!


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## ddkay

Zero Hedge responded to the G&M's articles saying in the case of Lehman Tier 1 capital ratios are misleading and TCE is a better indicator of a banks strength

"The Tier 1 capital ratios commonly used by banks present a misleading picture as to the capital adequacy of banks. The Tier 1 ratio includes preferred stock, hybrids and subordinated debt as capital and then risk weights assets, leading to a risk weighted asset number that is much less than the total asset number. This can lead to a situation where banks have high Tier One Ratios but very low tangible common equity ratios (see graph below)"

http://www.zerohedge.com/news/who-john-paulson-and-why-should-globe-and-mail-care

Here were Canadian bank TCE and Tier 1 capital ratios in 2009 from this older G&M article:



> Analysts took the point, with Jim Bantis at Credit Suisse pointing out, “as we have seen within the United States, large and small banks with adequate Tier 1 ratios (bolstered with innovative capital and preferred shares) still suffered dire consequences.”
> 
> Now Citi, with its balance sheet a mess, has a TCE ratio of 3 per cent, but may move to anything from a 5.4 per cent to 8.1 per cent ration by the time the latest government bailout is done, according to Mr. Bantis. He added that for all banks: “In our view, the minimum level should be a 7 per cent TCE ratio.”
> 
> And how do the Canadian banks fare on this front? Well, the average for the group is 7.1 percent, according to Credit Suisse, and here is how that breaks down, bank by bank.
> 
> - Bank of Montreal - TCE ratio is 8%, Tier 1 capital ratio is 10.6%
> - Bank of Nova Scotia - TCE is 7.5%, Tier 1 is 9.5%
> - CIBC - TCE is 6.6%, Tier 1 ratio is 9.8%
> - National Bank - TCE is 6.5%, Tier 1 is 10%
> - Royal Bank of Canada - TCE is 6.8%, Tier 1 is 10.6%
> - Toronto-Dominion Bank - TCE is 7.2%, Tier 1 is 10.1%


Now all Canadian bank TCE's are less than 4.5.. so something bad definitely happened. Edit: Hmm it seems it's just the way banks calculate TCE. BMO's stated TCE ratio on April 30, 2011 was 8.6%, based on TCE/Risk-Weighted Assets instead of Total Assets. So it may be misleading, but Basel II/III say it's fine to use. 



> In calculating the pro-forma impact of Basel III on our regulatory capital and regulatory capital ratios, we have assumed our interpretation of the proposed rules
> announced by the Basel Committee on Banking Supervision (BCBS) as of this date and our models used to assess those requirements are consistent with the final
> requirements that will be promulgated by BCBS and the Office of the Superintendent of Financial Institutions Canada (OSFI). We have also assumed that the proposed
> changes affecting capital deductions, risk-weighted assets, the regulatory capital treatment for non-common share capital instruments (i.e. grandfathered capital
> instruments) and the minimum regulatory capital ratios are adopted as proposed by BCBS and OSFI. We also assumed that existing capital instruments that are non-Basel
> III compliant but are Basel II compliant can be fully included in such estimates. The full impact of the Basel III proposals has been quantified based on our financial and risk
> positions at April 30 or as close to April 30 as was practical. The impacts of the changes from IFRS are based on our analysis to date, as set out in Transition to International
> Financial Reporting Standards in the Future Changes in Accounting Policies – IFRS section in our 2010 Annual Report and later in this document. In calculating the impact of
> M&I on our capital position, our estimates reflect expected RWA and capital deductions at closing based on anticipated balances outstanding and credit quality at closing
> and our estimate of their fair value. It also reflects our assessment of goodwill, intangibles and deferred tax asset balances that would arise at closing. The Basel
> rules could be subject to further change, which may impact the results of our analysis. In setting out the expectation that we will be able to refinance certain capital
> instruments in the future, as and when necessary to meet regulatory capital requirements, we have assumed that factors beyond our control, including the state of the
> economic and capital markets environment, will not impair our ability to do so.


http://www.sedar.com/GetFile.do?lan.../00000001/c:\SEDAR\FILINGS\2011\Q2\MDAEng.pdf


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## ddkay

Maybe the federal government allowing low-grade CMHC mortgages to be backstopped by Canadian taxpayers is coming back to haunt them, if we have a US style housing crash AAA-rated Canadian sovereign debt will take a hit, and Canadian banks hold a significant amount of Canadian sovereign debt


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## Causalien

I am really surprised that our Canadian banks are calculating TCE based on risk weighted assets when American banks, under higher scrutiny, are trying to meet BASEL 3 TCE based on all assets. My guess is that taking away the preferred shares as capital did a lot of damage on the bank's TCE.

Based on the difference in ratio, half of our bank's assets are at risk if and when real estate falls. Based on the stats generated between 2008 till now. Only 30% of risky mortgage loans remain current. While the prime rated loans varies between 3% to 6%. 

So moving on. Canadian banks total assets should be revalued at 63.5% of its full value for fundamental investing. Our banks are lending out 20 dollars for every dollar of deposit.

Edit: All figures are back of the napkin calculation


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## kcowan

kcowan said:


> Long term, the market tracks GDP growth so the current swing is reacting to the revision downward of 1Q and the lacklustre 2Q. Companies that are bucking this trend will do well.
> 
> 1Q was 1.9% now 0.4%! This is what spooked the market.
> 
> 2Q 1.3% now but do we believe it? If they got 1Q so wrong, what confidence do we have on the 1.3%?


Now 2Q has been revised from 1.3% to 1.0% outlook. Pretty pathetic!

When will we get some good news?


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## MikeT

MikeT said:


> I went to the bank and got my line of credit set up. Money is being transferred now. The house is going on the table boys and girls!
> 
> And for the doubters, keep doubting ... The lower you force the market, the more money I make. Dow 9000 baby!
> 
> And have a look at that jobs number this morning and keep telling yourself we're having a recession.


De-leveraged myself this week. Essentially I had a million dollars on the table for several months - alot of borrowed money. Almost 20% return. (roughly 15% for the core holdings but I had a variety of leveraged products at work.)

Could maybe go even higher, but the story isn't as strong as it was back then.


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## ddkay

Everyone was wondering where you went.


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## linovafxtry

I hardly doubt it will be about financial crash ...just high volatility, which can be associated with high profit if an investor is smart enough


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## dogcom

I am only thinking about buying XSB at this time as everything looks to risky on the bearish or bullish front right now. I expect the market to be down a lot in the next year or two but it will be a very bumpy ride getting there making it very hard for a bear to make money on it.


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## Belguy

dogcom, your latest post is similar to many that were being submitted this time last year by the majority of posters and so I took the advice and invested in short term bonds and guess which bonds had the best performance last year--why, of course, long term bonds.


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## zylon

*okay ... so I'm a day late*

Walking into the bar, Mike said to Charlie the bartender, "Pour me a stiff one --- 
just had another fight with the little woman."

"Oh yeah?" said Charlie, "And how did this one end?"

"When it was over," Mike replied, "She came to me on her hands and knees.


"Really?" said Charles, "Now that's a switch! What did she say?"

She said, *"Come out from under the bed, ya little chicken!"*










http://www.travelingboy.com/archive-travel-raoul-irishjokes.html


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## Belguy

You'd have to drag me out!! It's still v-e-r-r-r-y scary out there!!!


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