Financial Markets Meltdown

[KinAlberta]

My market behaviour in the mid-2000s was an obsession with market conditions that could lead up to a market collapse (derivatives, housing, etc) and I eventually sold almost everything and kept only cash rich companies that would take advance of a possible market collapse. (BRK, Loews, Fairfax Financial, Markel, Apple, etc). In the end only BRK acted on the opportunities. Even Loews got defensive. Basically cash was king, not owning cash rich companies.

My market behaviour this past spring was to completely ignore the pandemic’s effects. I made zero trades and only even looked at the brokerage accts maybe once over about six or seven months from January on.

Funny though, now with the rapid market recovery and the huge amount of money printing, government borrowing and the central bank interventions I’m back to dwelling on the ramifications and risk/opportunity of a future panic.

[Dean2]

Originally Posted by KinAlberta

My market behaviour in the mid-2000s was an obsession with market conditions that could lead up to a market collapse (derivatives, housing, etc) and I eventually sold almost everything and kept only cash rich companies that would take advance of a possible market collapse. (BRK, Loews, Fairfax Financial, Markel, Apple, etc). In the end only BRK acted on the opportunities. Even Loews got defensive. Basically cash was king, not owning cash rich companies.

My market behaviour this past spring was to completely ignore the pandemic’s effects. I made zero trades and only even looked at the brokerage accts maybe once over about six or seven months from January on.

Funny though, now with the rapid market recovery and the huge amount of money printing, government borrowing and the central bank interventions I’m back to dwelling on the ramifications and risk/opportunity of a future panic.

Well, if you have enough money to live on the rest of your life without needing it to grow or earn income, a guy could sell out and sit in 5 year GICs at 1.3 to 2.0%. A guy could build a laddered portfolio from 1 to 10 years, spread the money around between CDIC insured financial institutions to the CDIC limit and basically have no risk. Means you would only average 15,000 of income per million invested, so you wouldn't be keeping up to inflation after tax but you have zero risk to the principal. Other viable choice is to find some other asset class like real estate to put the money into. The issue with rental income is it is more work than passive investment but a person can always hire a Management company to look after the properties.

The stress and risk of investing in the stock market is not for everyone

[KinAlberta]

I’ve never believed in getting right out of equities. Odds are it will only reduce one’s returns. However one never wants to be in the position of having to sell low.

So I always try to keep in mind a few past events to challenge my optimism as over the last 40-45 or so years I’ve normally been 80%+ in equities: the Great Depression and Japan 1980-2000

Huge numbers of people were invested in equities in the 1920s and huge numbers of those people had to sell into the massively collapsing markets of the early 1930s. Down around 80% over about 4 years post 1929 crash.

Japan’s economy was the second largest in the world. From its peak it fell about 75% and then stayed way down for decades. So in a risking market institutional money and retail investors tend to pile more and more money into the winning asset category. I imagine that is what had happened in Japan. By about 1990 the retail money management sector had shrunk by close to 90%!!! That shows how disastrous the collapse was to retail investors. Imagine a japanese citizen approaching retirement in 1980 and seeing his/her nikkei equity portfolio fall by 75% and essentially stay there.


On “expectations”, I once owned a 1937 3.25% GoC perp. Before selling it I photocopied it with its remaining attached coupons to show friends and family. Its one of the best examples i’ve found in terms of people looking in the rear view mirror thinking that the future will be like the past!!! A 3.25% perp!!! Unbelievable!

[KinAlberta]

Trivia:

” (by comparison, the Dow fell... 89% during the Great Depression)”

Depression of 1920–1921 - Wikipedia

Stocks fell dramatically during the recession. The Dow Jones Industrial Average reached a peak of 119.6 on November 3, 1919, two months before the recession began. The market bottomed on August 24, 1921, at 63.9, a decline of 47% (by comparison, the Dow fell 44% during the Panic of 1907 and 89% during the Great Depression).[11] The climate was terrible for businesses—from 1919 to 1922 the rate of business failures tripled, climbing from 37 failures to 120 failures per every 10,000 businesses. Businesses that avoided bankruptcy saw a 75% decline in profits.[9]

https://en.wikipedia.org/wiki/Depression_of_1920–1921

Source:
https://tradingninvestment.com/100-y...story-chart/2/

[KinAlberta]

Japan “2 decades lost”



Source:
https://trader2trader.wordpress.com/...rt-70s-12-6-2/




Good counterpoints but “never say never”

Buy & Hold Lives On: The Stock Market Is Not The 1990 Nikkei Or 1999 S&P | Seeking Alpha
https://seekingalpha.com/article/423...i-1999-s-and-p

[KinAlberta]

Governments and central banks have come in big time through lowering interest rates and bailouts.


Billionaire Warren Buffett on helping the poor: ‘A rich family does not leave people behind’
Sep 5 2018

Excerpt:

“ He’s made the point before. “Everything should be devoted initially to getting greater productivity,” said Buffett at Columbia University in 2017. “But people who fall by the wayside, through no fault of their own, as the goose lays more golden eggs, should still get a chance to participate in that prosperity. And that is where government comes in.” ...”


https://www.cnbc.com/2018/09/05/warr...&doc=105609545

[MooseRiverTrapper]

Lots of promise in the Canadian energy sector right now...

[ORV]

What are your guys thoughts on gold or silver now or in the next couple
of months?
Buy some or stash cash in the mattress instead?

Orv

[Ken07AOVette]

Originally Posted by ORV

What are your guys thoughts on gold or silver now or in the next couple
of months?
Buy some or stash cash in the mattress instead?

Orv

With gold at it's highest in forever I would be selling. I may do that right away.

just checked- it is at it's highest it has been in over 30 years. It is bitcoin risk right now to buy lol

Which coincidentally is $23,500 CAD today

[bdub]

Originally Posted by ORV

What are your guys thoughts on gold or silver now or in the next couple
of months?
Buy some or stash cash in the mattress instead?

Orv

Gold and silver fundamentals are very strong. A week or so ago was a good entry spot. Right at the 200 day moving average. The next best spot was in March at under 1500$. Sold off a bit yesterday on another 1 trillion spending bill out of the States. Go figure.

The big holders of physical gold are central banks. Its a different market than stocks, many of which are at all time highs on other metrics besides just price.

If you don’t hold gold I think anytime is a good time to pick some up. Certainly not all of your eggs, but some. Same as I wouldn’t have it all in stocks or some other asset. Cash is 100% a depreciating asset, so other than the optionality, cash is a big drag on returns.

[Sundancefisher]

https://www.fool.ca/2020/12/09/marke...ur-dreams/amp/

[Jim Blake]

With all the turmoil these days surprisingly enough the TSX is above 18,000 today!!

[fishnguy]

^ Not surprising. I wonder if or when it is going to crash and how hard.

There was an article at Reuters yesterday:



It’s pretty insane, IMO.

[Dean2]

So the TSX is back to 18,000 and has fully recovered from the March sell off. Most stock groups, except Energy, have too. When do you guys think the next great buying opportunity is going to come around, how many are bailing out of the Fangs and locking in their profits from the last 18 months. What are you doing with the excess cash if you are still sitting on some?

[bdub]

Originally Posted by Dean2

So the TSX is back to 18,000 and has fully recovered from the March sell off. Most stock groups, except Energy, have too. When do you guys think the next great buying opportunity is going to come around, how many are bailing out of the Fangs and locking in their profits from the last 18 months. What are you doing with the excess cash if you are still sitting on some?

The next great buying opportunity is here and it's in the inflation trade. Agricultural commodity plays Corn, wheat, soybeans etc. are on a ripper. Nat gas, oil, copper, iron ore. All that stuff is ramping up in prices and is gone half unnoticed by retail imo. Time to cycle out/lighten up on tech and bonds, bond proxies. US ten year yield tagged 1.19 a couple days ago. We loaded up in August/September on CDN oil, CNQ, PPL, TOU, ALA. In ag, NTR has been a long timer that's been good as well lately. The EV play NFI is another holding that I think is going to benefit from the Biden green agenda, up 30% in the last couple days on forward guidance. Nat gas is looking great going forward imo, the new green energy. Fully loaded on gold and gold miners as well. Light on financials. Still holding some weight in Telcos, Utilities as defense. That's how I'm looking at things right now, not much cash sitting. Some, but down significantly from last February/March. May be completely out of whack on my thinking but we'll see I guess. Good luck all.

[raab]

Originally Posted by Dean2

So the TSX is back to 18,000 and has fully recovered from the March sell off. Most stock groups, except Energy, have too. When do you guys think the next great buying opportunity is going to come around, how many are bailing out of the Fangs and locking in their profits from the last 18 months. What are you doing with the excess cash if you are still sitting on some?

I'd still be buying good companies if all my money wasn't already invested. I'm watching Boeing as they're too big to fail. What's important to note is the rise in prices isn't because of improved earnings. It's 100% because of the excess money printed since March. Your just seeing inflation in the stock market first, because the velocity of money is way down. Once that velocity picks up, expect high inflation.

https://tradingeconomics.com/canada/money-supply-m2
https://fred.stlouisfed.org/series/M2V

[fishtank]

Originally Posted by raab

I'd still be buying good companies if all my money wasn't already invested. I'm watching Boeing as they're too big to fail. What's important to note is the rise in prices isn't because of improved earnings. It's 100% because of the excess money printed since March. Your just seeing inflation in the stock market first, because the velocity of money is way down. Once that velocity picks up, expect high inflation.

https://tradingeconomics.com/canada/money-supply-m2
https://fred.stlouisfed.org/series/M2V

yep, definitly inflation i think democrat or more willing when it come to the QE printing, also they are more bail out friendly .

i have 20% invested in kirkland lake, 10% in suncor and 10% in WM the rest is sitting on cash. just havea feeling that their will be a entry point sometime this year iam willing to wait it out .

[raab]

Originally Posted by Pixel Shooter

I just bailed and cashed out. Got to be a correction coming once gov’t funds stop. You know those funds that your kids,kids,kids will be stuck paying. No correlation right now to economy health. Don’t get it. Time will tell

If you have the funds you should buy a farm. And the money printing isn't going to stop. Welcome to MMT, the whole system will crash when people realize the currency is basically monopoly money.

[raab]

Originally Posted by fishtank

yep, definitly inflation i think democrat or more willing when it come to the QE printing, also they are more bail out friendly .

i have 20% invested in kirkland lake, 10% in suncor and 10% in WM the rest is sitting on cash. just havea feeling that their will be a entry point sometime this year iam willing to wait it out .

My holdings right now are 33% JPM, 33% XOM, 33% TRP.TO. Bought them all around their lows and have been getting paid the dividends ever since.

[MooseRiverTrapper]

Biden already talking about another trillion dollar stimulus. Don’t fight the fed. Lots of upside in the oil and gas sector.

[big zeke]

I just rolled out of a bunch of Tech stocks that have had a great run (some up 70% y/y) but might run out of legs soon. Moved into some investment grade bonds to sit it out for a bit (just in case a correction is coming soon), already had a pile in these bonds and did 30% y/y. Put more in copper (commodity has almost doubled and this metal will lead any rebound) and some O&G though none of the big guys.

Expect to evaluate in April (maybe sooner) if the markets take off due to pent up savings just itching to go (ref. RBC investor conference last week). If so WTI pricing will go up as travel opens up (viz vaccines and their promised relief).

Last 6 months have been great but concerned the music will stop and I'll be trying to catch a falling knife...tried that once and never again. I don't need to hit the highest high or buy at the lowest low, I'll let someone else lead that charge, a good fast follower perhaps.

[roper1]

So much depends on your timeline. Gov'ts worldwide owe a lot of money. Interest rates will remain low. Money has to go to equities. Time in the market gents, timing the market is a mug's game.

[fishnguy]

In the past month, gun related, ganja, gold diggers, crypto related, personal security device manufactures/developers, EV, lithium, green energy have done very well, some extremely well. I only have pennies invested, but I made about 30% since just before the run-off election in Georgia. Still holding a couple of ganja stocks and a couple of copper and gold diggers. Really regret not holding some lithium stocks.

There will be more money coming in shortly, I am sure. A lot more. Not sure there will be any meltdown in the immediate future. See the image I posted above in regards to bankruptcies, for example. Who knows.

[KGB]

Originally Posted by roper1

So much depends on your timeline. Gov'ts worldwide owe a lot of money. Interest rates will remain low. Money has to go to equities. Time in the market gents, timing the market is a mug's game.

This! All this guessing means little when you are trying to time the market. During the last what I called COVID correction, lots of people panicked and sold and by the time they got guts to get back- they already missed 30% upswing. If you are invested in a quality stocks, it will recover after the correction. If you are investing in penny stocks, then this is gambling and not an investment.

[fishtank]

Originally Posted by MooseRiverTrapper

Biden already talking about another trillion dollar stimulus. Don’t fight the fed. Lots of upside in the oil and gas sector.

2 trillion

[Dean2]

Yes, as long as governments are flushing this much liquidity into the system it has to go somewhere and the markets have been a big winner as a result. Now when that party stops and inflation kicks in, that will be a whole other ball of string. In the meantime however, being out of the market is going to mean you forego a LOT of upside.


I also agree with the majority of what bdub said in his last post, though he and I will never agree on Gold. The sectors that benefit from the economy opening up, as well as inflation is the right rotation, and with the massive moves to regulate Amazon, Google , Twitter and Facebook in the States and Europe those areas are likely to take a hit.

[Sundancefisher]

Originally Posted by Dean2

Yes, as long as governments are flushing this much liquidity into the system it has to go somewhere and the markets have been a big winner as a result. Now when that party stops and inflation kicks in, that will be a whole other ball of string. In the meantime however, being out of the market is going to mean you forego a LOT of upside.


I also agree with the majority of what bdub said in his last post, though he and I will never agree on Gold. The sectors that benefit from the economy opening up, as well as inflation is the right rotation, and with the massive moves to regulate Amazon, Google , Twitter and Facebook in the States and Europe those areas are likely to take a hit.

I agree but at the same time the market can be a fickle beast that turns suddenly on a dime. Just need a few companies like https://driving.ca/tesla/features/fe...g-ponzi-scheme to come to a lower valuation reality and all stocks will get an extra look.

With Covid driving down business and jacking up debt both company and government wise... at the same time the market has climbed...a crash seems inevitable. Just a matter of when.

That being said it may drive investment into oil and gas so long as Saudi forgo their recently ended battle for market share

[Drewski Canuck]

The subtle benefactor of the Governments pumping money into the economy, and propping up the stock markets, is the Government itself!

State and City Pension Funds, Soverign Funds, etc, all benefit

Drewski

[Zip]

So just to ask a question here...what penny stocks are the best to buy right now on the TSX..I play with money just on this platform and could use some good advice on what might or not might work...thanks a bunch for any answers!
Zip

[Dean2]

So the TSX fully recovered from its low of 11,200, to it previous record high by early Dec but overall has only gone up to 18,300, so another 700 points, in the last three months. There are however certain sectors that have really rotated. The premier Canadian Banks, RBC, TD, heck even BNS, CIBC and BMO, which all the BNN experts said to avoid in Oct are up 60% in the last 12 months and are well above their pre-melt down highs. Even oil and gas stocks have rebounded strongly, Vermilion went from a low of a buck to over 7.60, Freehold from $2.60 to $7.00. Peyto, Whitecap, CNRL and Siuncor have all rebounded well off their lows. The only ones not moving much yet are the pipelines like TRP, ENB etc. Last set of laggard stocks are the REITs, especially ones with office or indoor mall space.
If you are still waiting on the buying opportunities you may want to look at the laggard industries, especially those with good and secure dividend streams, and rotate out of the Fangs to lock in profits.