Financial Markets Meltdown

[Twisted Canuck]

What Dean said. I was paying attention last fall, and seeing the writing on the wall, so converted my variable to a fixed rate for balance of the term (4 years) at 1.98%. There is an article in FP today regarding increases, anybody who hasn't been paying attention is going to be paying in blood sweat and tears later. Time to do it is right now.

https://financialpost.com/executive/...awkish-heights

[Map Maker]

Play this little game to see if your market intuition is good on buy/sell by timing the markets.

https://www.personalfinanceclub.com/...e-market-game/

[fishtank]

Originally Posted by Map Maker

Play this little game to see if your market intuition is good on buy/sell by timing the markets.

https://www.personalfinanceclub.com/...e-market-game/

There a cheat…. the graph % increased ,before the line treads upward.

[Dean2]

Well, the Federal Budget proved what we all know, the Liberals can suck and blow at the same time. Despite massively higher income for Oil and Gas, more taxes due to the economy picking up they are still going to run a $52 BILLION dollar deficit, after piling on Hundreds of Billions to the National debt over the last three years.

I won't go through all the various budget announcements but I will say, you think inflation is bad now, you ain't seen nothing yet. Not one thing they announced will be effective in slowing the growth in any prices let alone house prices. When you are bringing in a 400,000 legal immigrants and another 200,000 illegals a year and building nowhere near enough housing the demand far exceeds supply. If you want your kids to be able to afford a house, buy it now, and rent it out till they grow up and need it. Over the next 20 years the increase in house prices will put them out of reach of most young people in 2040. Canada already has the world's worst affordability numbers, house cost/average wage and it is going to get a lot worse.

You are also going to see a sharp and rapid rise in the Bank of Canada rate, which will cause the Banks to raise their rates. We have a very real possibility of seeing Stagflation with that combination of factors. Higher taxes, high inflation, slowing to even negative growth - what a cluster.

[fishtank]

Originally Posted by Dean2

Well, the Federal Budget proved what we all know, the Liberals can suck and blow at the same time. Despite massively higher income for Oil and Gas, more taxes due to the economy picking up they are still going to run a $52 BILLION dollar deficit, after piling on Hundreds of Billions to the National debt over the last three years.

I won't go through all the various budget announcements but I will say, you think inflation is bad now, you ain't seen nothing yet. Not one thing they announced will be effective in slowing the growth in any prices let alone house prices. When you are bringing in a 400,000 legal immigrants and another 200,000 illegals a year and building nowhere near enough housing the demand far exceeds supply. If you want your kids to be able to afford a house, buy it now, and rent it out till they grow up and need it. Over the next 20 years the increase in house prices will put them out of reach of most young people in 2040. Canada already has the world's worst affordability numbers, house cost/average wage and it is going to get a lot worse.

You are also going to see a sharp and rapid rise in the Bank of Canada rate, which will cause the Banks to raise their rates. We have a very real possibility of seeing Stagflation with that combination of factors. Higher taxes, high inflation, slowing to even negative growth - what a cluster.

House market is red hot right now. And even the overpriced house are selling .. might see a bid up above asking price, it a seller market . Give it a year or 2 ( if liberal stay til 2025 ) inflation will be uncontrollable and interest rate is sky high .

[bdub]

Originally Posted by Dean2

Another thing to think about, if you have fixed rate bonds in your portfolio, good time to sell them off, not as good as 8 months ago but better than it will be 8 months from now.

A lot of retail investors have no idea of the pain rising rates are going to have on the bond holdings in their portfolios. Lots of people are still holding the traditional 60/40 split because they are sold the idea that holding bonds provides some safety to their portfolios, providing a hedge to their equity weighting. Doesn't work to great when bonds and stocks both fall in price on rising rates. That is the state of affair that many US centric investors are facing. Canadian index investors are faring somewhat better due to commodity producers in the TSX.

Do the calculation on a ten year US government bond going from 1.5%, a rate we had as late as December to the current 2.7%. Then do the calculation with rates rising to 5% and check out the capital loss. Scary stuff. Bond convexity really bites as rates go up from very low levels.

[Dean2]

Originally Posted by bdub

A lot of retail investors have no idea of the pain rising rates are going to have on the bond holdings in their portfolios. Lots of people are still holding the traditional 60/40 split because they are sold the idea that holding bonds provides some safety to their portfolios, providing a hedge to their equity weighting. Doesn't work to great when bonds and stocks both fall in price on rising rates. That is the state of affair that many US centric investors are facing. Canadian index investors are faring somewhat better due to commodity producers in the TSX.

Do the calculation on a ten year US government bond going from 1.5%, a rate we had as late as December to the current 2.7%. Then do the calculation with rates rising to 5% and check out the capital loss. Scary stuff. Bond convexity really bites as rates go up from very low levels.

Absolutely right. Anyone holding bonds, bond related etfs or bond mutual funds should be selling them off for sure. If rates go up even 2 or 3% the effect on the value is dramatic. Like you say, the more it goes up the rate of price drop accelerates, it is not linear.

[DiabeticKripple]

Originally Posted by fishtank

House market is red hot right now. And even the overpriced house are selling .. might see a bid up above asking price, it a seller market . Give it a year or 2 ( if liberal stay til 2025 ) inflation will be uncontrollable and interest rate is sky high .

Yep craziness right now.

A friend put an offer in on a house in Calgary at $75,000 over asking price and still lost out

[Jim Blake]

Originally Posted by Dean2

Well, the Federal Budget proved what we all know, the Liberals can suck and blow at the same time. Despite massively higher income for Oil and Gas, more taxes due to the economy picking up they are still going to run a $52 BILLION dollar deficit, after piling on Hundreds of Billions to the National debt over the last three years.

I won't go through all the various budget announcements but I will say, you think inflation is bad now, you ain't seen nothing yet. Not one thing they announced will be effective in slowing the growth in any prices let alone house prices. When you are bringing in a 400,000 legal immigrants and another 200,000 illegals a year and building nowhere near enough housing the demand far exceeds supply. If you want your kids to be able to afford a house, buy it now, and rent it out till they grow up and need it. Over the next 20 years the increase in house prices will put them out of reach of most young people in 2040. Canada already has the world's worst affordability numbers, house cost/average wage and it is going to get a lot worse.

You are also going to see a sharp and rapid rise in the Bank of Canada rate, which will cause the Banks to raise their rates. We have a very real possibility of seeing Stagflation with that combination of factors. Higher taxes, high inflation, slowing to even negative growth - what a cluster.

Same last name, an even worse disastrous course of action. History really does repeat itself and sometimes on a more monumental scale and end result.

Batten down the hatches!!!

[raab]

Originally Posted by Dean2

Well, the Federal Budget proved what we all know, the Liberals can suck and blow at the same time. Despite massively higher income for Oil and Gas, more taxes due to the economy picking up they are still going to run a $52 BILLION dollar deficit, after piling on Hundreds of Billions to the National debt over the last three years.

I won't go through all the various budget announcements but I will say, you think inflation is bad now, you ain't seen nothing yet. Not one thing they announced will be effective in slowing the growth in any prices let alone house prices. When you are bringing in a 400,000 legal immigrants and another 200,000 illegals a year and building nowhere near enough housing the demand far exceeds supply. If you want your kids to be able to afford a house, buy it now, and rent it out till they grow up and need it. Over the next 20 years the increase in house prices will put them out of reach of most young people in 2040. Canada already has the world's worst affordability numbers, house cost/average wage and it is going to get a lot worse.

You are also going to see a sharp and rapid rise in the Bank of Canada rate, which will cause the Banks to raise their rates. We have a very real possibility of seeing Stagflation with that combination of factors. Higher taxes, high inflation, slowing to even negative growth - what a cluster.

Housing Market is about to blow up, and stagflation is here. With supply chain break down I think we see a recession by September. My advice invest in US companies and buy physical gold/silver. If you already own a home to protect against inflation, I'd also look at opening a line of credit on a fixed rate to sit on. Theres a real possibility we see deflation as rates rise.

[Twisted Canuck]

A good article from the FP today, that gives a real perspective on the Liberal's budget. As opposed to some of the gob-smackingly obtuse articles I have seen that actually try to put a good positive spin on the budget,

https://www.google.ca/amp/s/financia...275b5e116/amp/

[ehrgeiz]

Anyone starting to feel like we're on a sinking ship. The captain has purposely hit the iceberg. The majority have accepted their doom and are just getting hammered on deck and having a good time as we go down, meanwhile I'm in the ready position with my life boat, but will probably die of exposure shortly after the ships sunk anyway haha.

You'll own nothing and you'll be happy doesn't seem like a conspiracy theory much anymore.

[fishtank]

Originally Posted by ehrgeiz

Anyone starting to feel like we're on a sinking ship. The captain has purposely hit the iceberg. The majority have accepted their doom and are just getting hammered on deck and having a good time as we go down, meanwhile I'm in the ready position with my life boat, but will probably die of exposure shortly after the ships sunk anyway haha.

You'll own nothing and you'll be happy doesn't seem like a conspiracy theory much anymore.

Market didn’t react much to the rate hike, so it seem that way. Shopify decide to do the split and offer employees option of take stock or salary payment , seem like everyone trying to get as much capital/padding as they can until SHTF…

[Drewski Canuck]

Originally Posted by ehrgeiz

Anyone starting to feel like we're on a sinking ship. The captain has purposely hit the iceberg. The majority have accepted their doom and are just getting hammered on deck and having a good time as we go down, meanwhile I'm in the ready position with my life boat, but will probably die of exposure shortly after the ships sunk anyway haha.

You'll own nothing and you'll be happy doesn't seem like a conspiracy theory much anymore.

There is ONE ADVANTAGE to being a Canadian taxpayer: Principal Residence Exemption. This has been the cornerstone of financial security for families for the last 80 years. This is the wealth that gets passed down from generation to generation.

THIS is Trudeau's answer to his budget problem, tax the capital gains on the principal residences, but AFTER getting re elected.

Now we have socialism as there is no point investing in your own home as a savings vehicle, or owning your own home.

On a side note, the dental coverage proposed in the Budget really smells like a policy platform for a snap election by the Liberals.

The Libs know that by 2025 the Canadian Economy will be awash in inflation and job loss. The Libs know that the Oil Industry has been chased out of Canada with its net zero 2035 policies. The Libs also know that the price of oil will hammer the driving public in the future, as we still do not have enough electrical capacity to charge large scale electrical car ownership, and we have no electrical cars anyway.

So I hope I am wrong. But do not be surprised if the Liberals attempt to cut the Conservatives off at their knees while the Conservative leadership race is ongoing and especially with the the economic wreckage that is coming in the next few years.

Drewski

[KGB]

“It's official! Russian Central Bank announces that the ruble is tied to gold! 5000 rubles per gram.

The Central Bank of Russia has officially announced that the Russian ruble will be tied to gold as of March 28, 2022, The rate is 5,000 rubles per gram of gold ingots.
There are 28 grams in each ounce. 28 grams for 5,000 rubles per gram is 140,000 rubles.

Are you following me this far?

The conversion rate of rubles into US dollar is 100 rubles, 90 pounds, for each US dollar.

If the rubles are tied to gold at 5000 rubles per gram, and there are 28 grams per ounce, which means that an ounce of gold would cost 140,000 rubles, then the conversion into US dollars means that gold costs 1400 dollars per ounce when used the rubles, instead of 1,928 dollars by ounce using the dollars.

Russia just wiped out about 30 percent (30%) of the US dollar worldwide when it comes to gold ingots.

People all over the world are literally throwing their money on the ruble and throwing away dollars and euros to do it.
What Russia just did is the financial equivalent of detonating a nuclear bomb.

FYI, the last guy on this planet to try to support a currency with gold was Muammar Quadaffi of Libya.

NATO entered Libya, bombed it to death, until the Libyan people took Quadaffi on the street, beat him with blood and planted a bullet in their head.
As of now, 10:39 PM EDT, I suspect bankers around the world are on the phone between themselves and the heads of state, instructing them that what Russia has done will totally destroy both the US dollar and the euro, and those bankers of Frog to the heads of state that world war 3 must start immediately.

Let me explain why.

Today, the Central Bank of Russia anchored the ruble to gold.

Last week, Russia said it would sell only OIL and GAS in . . . . Ruble!

This means that Russian oil and gas are anchored in gold with rubles like gold proxy.

EFFECT: Europe (which needs Russian gas and oil) will now have to buy rubles from Putin using gold, or pay for oil and gas with gold itself.

Currently, the FOREX rate for Rubli to Dollari is around 100:1

BUT... with 5,000 Rubli now equivalent to a gram of Gold, and oil being priced directly into Gold, we will see a MASSIVE price disturbance in the FOREX markets, in terms of how much Gold a Dollar can still buy.

Foreign countries holding our dollar debt notes as a reserve will see an immediate and much less use for them and want to start downloading them in favor of something more stable; something that holds its value.

Basically, any currency anchored in gold will fit into the account. which means countries like that - like Japan - will start unloading their dollar debt as soon as possible - are not going to go down with the ship! They'll move to more stable values like... The Ruble.

This will have a DE-flationistic effect on the Rublo, making it more precious with time.
This also means that Putin can re-find the ruble whenever he wants, at 500, or 50, or 10. He just keeps getting more precious to him.

The immediate result is that all those foreign countries dumping their dollar reserves will make all those excess dollars start going home, triggering a worse hyper-inflation than we already have in the USA.”
Now how true this analysis is I don’t know since I’m not an economist but it does sounds pretty scary….

[Trochu]

Originally Posted by Drewski Canuck

On a side note, the dental coverage proposed in the Budget really smells like a policy platform for a snap election by the Liberals.

The dental coverage is 100% an NDP initiative that was necessary to gain their support to prop up the minority government for the next several years.

[Trochu]

Interesting, I like it when money is tied to gold/silver. They can still manipulate it somewhat "6000 rubles per gram" or "4000 rubles per gram" but better than just a piece of paper IMO.

[ehrgeiz]

It strikes that the table is being set to introduce the concepts of UBI, debt forgiveness (elimination of property rights) and social credit based on compliance. 2 years ago I would have and did laugh at this conspiracy, but after witnessing what was I can't shake the thought this is in fact the goal of Governments and other powerful actors. Still sounds ludicrous, but there is a limit to what can be explained by incompetence.

[bdub]

Originally Posted by KGB

“It's official! Russian Central Bank announces that the ruble is tied to gold! 5000 rubles per gram.

The Central Bank of Russia has officially announced that the Russian ruble will be tied to gold as of March 28, 2022, The rate is 5,000 rubles per gram of gold ingots.
There are 28 grams in each ounce. 28 grams for 5,000 rubles per gram is 140,000 rubles.

Are you following me this far?

The conversion rate of rubles into US dollar is 100 rubles, 90 pounds, for each US dollar.

If the rubles are tied to gold at 5000 rubles per gram, and there are 28 grams per ounce, which means that an ounce of gold would cost 140,000 rubles, then the conversion into US dollars means that gold costs 1400 dollars per ounce when used the rubles, instead of 1,928 dollars by ounce using the dollars.

Russia just wiped out about 30 percent (30%) of the US dollar worldwide when it comes to gold ingots.

The Face book post is a bit misleading. Gold and other precious metals are traded in troy ounces at 31.1035 grams/troy oz.

The Ruble strengthened soon after Putin announced the linkage to gold from an invasion high of 130 or something like that, to around 80 Rubles/1 USD recently. That was a couple weeks ago.

The price of gold today around 1980$ implies a ruble exchange rate around 78.5 R to the USD.

31.1035 x 5000/78.5 = 1981

Putin pretty much has all of Europe over a barrel with energy. Either pay in Rubles or gold or else. Russia and China have both been huge buyers of bullion for the last 10 plus years while at the same time dumping US treasuries as a hedge against the west imposing sanctions in just such an event as we are in now.

There is a probability something is going to break with the current USD system I bet.

[Dean2]

I have been looking over the investment portfolios of quite a few people the past couple of weeks, all close friends and relatives. I do not give investment advice, nor do I manage other's investments any more, all I can say is what I would do and think. What I can see is there is a definite pattern and it is not what I consider good. If you have a financial advisor and they have not reached out to you in the last two months, it is time to get a new advisor. The person you have is either incompetent or bone lazy. Wants your money with no work.

The portfolio mixes I am seeing are not in tune with what I would consider appropriate for the current environment and I am a VERY conservative investor. Over 2/3s of the portfolios I have been asked about have very large fixed income components. Many are buried in Mutual Funds variously termed as conservative income funds, Conservative Balanced Growth Funds etc. The other thing I am seeing a lot of, is people being sold mutual funds that are composed of a selection of the same issuers other mutual funds. This has to rank among the biggest fee collection rip offs in current investing. The first set of mutual funds collect a 1.7 to 2.5% MER and the second fund, made out of the selection of these funds, collects another 2% MER for doing less than sweet FA.

If you are in mutual funds take a look at what the funds holdings are. If there is a large component of Bond/fixed income, consider selling them and getting into something with no Bonds. IF you have mutual funds that are made up of other mutual funds, you need to look at getting a much better fund to work with and you should seriously be looking at the advisor that sold you that crap.

This is not the time to be dealing with an advisor you never hear from and you need to invest the time and effort to understand what you are invested in or you can end up massively screwed over by bad advice and counsel. Please, take the time to pull up your investments and review the holdings that are disclosed for them. Also, critically evaluate the value your current advisor is bringing to the table. You may need to talk to their manager and get a better person to replace them. You only get as good as you ask for and insist on. Best of luck.

[HyperMOA]

Originally Posted by Dean2

I have been looking over the investment portfolios of quite a few people the past couple of weeks, all close friends and relatives. I do not give investment advice, nor do I manage other's investments any more, all I can say is what I would do and think. What I can see is there is a definite pattern and it is not what I consider good. If you have a financial advisor and they have not reached out to you in the last two months, it is time to get a new advisor. The person you have is either incompetent or bone lazy. Wants your money with no work.

The portfolio mixes I am seeing are not in tune with what I would consider appropriate for the current environment and I am a VERY conservative investor. Over 2/3s of the portfolios I have been asked about have very large fixed income components. Many are buried in Mutual Funds variously termed as conservative income funds, Conservative Balanced Growth Funds etc. The other thing I am seeing a lot of, is people being sold mutual funds that are composed of a selection of the same issuers other mutual funds. This has to rank among the biggest fee collection rip offs in current investing. The first set of mutual funds collect a 1.7 to 2.5% MER and the second fund, made out of the selection of these funds, collects another 2% MER for doing less than sweet FA.

If you are in mutual funds take a look at what the funds holdings are. If there is a large component of Bond/fixed income, consider selling them and getting into something with no Bonds. IF you have mutual funds that are made up of other mutual funds, you need to look at getting a much better fund to work with and you should seriously be looking at the advisor that sold you that crap.

This is not the time to be dealing with an advisor you never hear from and you need to invest the time and effort to understand what you are invested in or you can end up massively screwed over by bad advice and counsel. Please, take the time to pull up your investments and review the holdings that are disclosed for them. Also, critically evaluate the value your current advisor is bringing to the table. You may need to talk to their manager and get a better person to replace them. You only get as good as you ask for and insist on. Best of luck.

So what would you recommend for both younger aggressive investors, and retired conservative investors? Just get out of bonds? What should a guy be moving to; equities? Can people get out of say 3 year bonds early?

[Dean2]

Originally Posted by HyperMOA

So what would you recommend for both younger aggressive investors, and retired conservative investors? Just get out of bonds? What should a guy be moving to; equities? Can people get out of say 3 year bonds early?

Bonds are not like GICs. The principal value of the investment is not guaranteed unless you hold the bond to full maturity. As interest rates go up, the value of a bond decreases, always. It is a function of how bond pricing works. You buy a bond for 1,000 and it yields 5%, or $50 a year. Interest rates go up to 6% so that 1000 bond should yield $60 a year, but since the yield is fixed it still only pays you $50, thus a new buyer only wants to pay you $835 for that 1,000 bond. Now if rates go to 9% a new buyer will only be willing to pay $555 for that bond you bought for $1000 because it is still only paying $50 a year. Why would anyone want to own an asset that is GUARANTEED to go down in value unless you hold it to maturity. Even then, you are earning 5% in a world that is paying more interest than you are earning. You are also earning that interest in an environment where inflation is running higher, by a lot, than the interest you are earning, and in many cases you have to pay tax each year on the interest earned, putting you even further behind inflation.

Conservative or aggressive, that doesn't sound like a winning deal to me. I don't make recommendations on what to do with the money instead, but I have posted detailed lists and performances, in this very thread, on a number of stocks I invest in personally. There is also real property and a host of other physical assets a guy can look at. It all depends on your expertise, comfort with various asset classes and risk tolerances.

[HyperMOA]

Originally Posted by Dean2

Bonds are not like GICs. The principal value of the investment is not guaranteed unless you hold the bond to full maturity. As interest rates go up, the value of a bond decreases, always. It is a function of how bond pricing works. You buy a bond for 1,000 and it yields 5%, or $50 a year. Interest rates go up to 6% so that 1000 bond should yield $60 a year, but since the yield is fixed it still only pays you $50, thus a new buyer only wants to pay you $835 for that 1,000 bond. Now if rates go to 9% a new buyer will only be willing to pay $555 for that bond you bought for $1000 because it is still only paying $50 a year. Why would anyone want to own an asset that is GUARANTEED to go down in value unless you hold it to maturity. Even then, you are earning 5% in a world that is paying more interest than you are earning. You are also earning that interest in an environment where inflation is running higher, by a lot, than the interest you are earning, and in many cases you have to pay tax each year on the interest earned, putting you even further behind inflation.

Conservative or aggressive, that doesn't sound like a winning deal to me. I don't make recommendations on what to do with the money instead, but I have posted detailed lists and performances, in this very thread, on a number of stocks I invest in personally. There is also real property and a host of other physical assets a guy can look at. It all depends on your expertise, comfort with various asset classes and risk tolerances.

So just run from the bond market; got it. Thanks.

[KGB]

Originally Posted by Dean2

So, KGB, 9 months down the road and you are up 30%. You can send that bottle of Crown over any time.


Once more, PPL is just one example of the benefits of being invested. Anyone that sat on the sidelines for the last year has missed a very large run up in share prices, assuming those that are invested avoided the Fangs or Tech. Lots of high quality, dividend paying stocks are up 25-75% in the past year, while inflation is running near 20% measured against real cost increases that affect the average persons' consumption. That means, $100,000 cash a year ago is worth $80,000 today. $100,000 in the model portfolio I post, including dividends, is worth at least $125,000, depending on the individual stock weights.

I hear people talking a lot about selling out into cash to avoid the upcoming drop, but no one seems to know when the drop will happen. I know one is coming too, but I have no idea when. My suggestion as always, build a good resilient portfolio, and try to look at it only every couple of weeks or so. Watching the daily fluctuations will drive most people nuts.

Hey buddy, I am out of jail now so Crown it is!

[fishtank]

Still a bit of craziness in the market as Netflix took and 30% dump yesterday . That’s 100+ billion dollar company and it shed 30% thats some crazy price swing . The California pension fund took a hit of $600+ million on their Netflix holdings ….

[DiabeticKripple]

market today isnt very good. getting killed again.

[thenaturalwoodsman]

A little pull back in Oil&Gas stocks for those that are not already in... Pick a junior, a small, medium, or large cap depending on your investing appetite.

[Bigfeet]

If you hold bonds to maturity, is it still a poor investment choice at this time?

[Dean2]

Originally Posted by Bigfeet

If you hold bonds to maturity, is it still a poor investment choice at this time?

In my opinion, yes, for exactly the reasons I just laid out above. Inflation greatly exceeds your yield. If the yield is taxed, even worse. Inflation is running 20 percent, even if u net 5 percent after tax on bonds your money is shrinking 15 percent a year. Even if you believe the gov inflation number u are losing 2 percent, and you can't easily find low risk 5 percent bonds.

[Bigfeet]

Sorry if this has already been discussed - I didn't spot it in a quick perusal of the thread (or maybe didn't understand it )- but what would be a good investment to look at? I agree that 7% inflation from government data seems low for real cost of living expenses. 5% bond yields, if you could find them, still falls behind this number. But, what is the better choice?