Financial Markets Meltdown

[Buckhead]

Yes those charts are very interesting. Thank you Dean.
They show about what I would expect.
In my world IPO's are only for speculation. I would never buy an IPO as a buy and hold strategy.

[Austin]

You have to factor the fact it is not so traditional a market any longer too. The advent of new interest in trading has skyrocketed. Tech has made this happen with trading apps. Take Robinhood alone, 16million new subscribers and the first two months of 2021 added another 6million subscribers. Wealthsimple in Canada has 1.5million users of their app. This Reddit gang driving up share price and sticking it to naked funding hedge funds is brilliant. Information is shared so fast and apps execute trades quickly and easily

[fishtank]

Originally Posted by Austin

You have to factor the fact it is not so traditional a market any longer too. The advent of new interest in trading has skyrocketed. Tech has made this happen with trading apps. Take Robinhood alone, 16million new subscribers and the first two months of 2021 added another 6million subscribers. Wealthsimple in Canada has 1.5million users of their app. This Reddit gang driving up share price and sticking it to naked funding hedge funds is brilliant. Information is shared so fast and apps execute trades quickly and easily

The casino is open, but who will run out cash first the customer or the house ? A lot of these new trader are not as deep pockets as the market makers/hedge fund. these traders might win a few battle but not the war.

[Buckhead]

I would agree. A time for extreme caution and diligence in one's choices of investments.
This isn't going to end well.

[fishtank]

Also a lot of these new traders have a mentality of a first time Vegas trip you already plan how much money to bring to loose most are playing with a free roll cash which they normally don’t access or just sitting in their RRSP or Roth 401k . In the long run that investing get a few hiccups and desperation turn into gambling, the thing about gambling it that the longer/more you play the more chance the house get to take all your money.

[Bushrat]

Originally Posted by fishtank

Also a lot of these new traders have a mentality of a first time Vegas trip you already plan how much money to bring to loose most are playing with a free roll cash which they normally don’t access or just sitting in their RRSP or Roth 401k . In the long run that investing get a few hiccups and desperation turn into gambling, the thing about gambling it that the longer/more you play the more chance the house get to take all your money.

This is how I see it. The easy trader schemes enticing many to sit at the card table where they have no business playing with the sharks. Just like casinos, some will win but more will lose, the house always wins. Just another ingenious wealth transfer scheme mostly spurring small time inexperienced investors to throw their money in the pool where more often then not the big sharks swim off with it..

[Dean2]

I think what you guys are saying has a lot of truth. I do not consider investing gambling, sitting at the Casino or a game that is rigged so only the big players can win. Now on the other side of the coin, we do have those that are gambling, and that does apply to a large number of the new traders. When you go looking for 100 to 2000% gains over a few months, you are clearly gambling. Bitcoin is the clearest recent example, as is the Gamestop run up. The IPOs I posted above were issued at fairly reasonable valuations for the most part, but doubled and tripled or more shortly after issue, then dropped back to or slightly below their issue prices because their earnings and growth do not support their frenzy driven highs. If you can buy IPOs at close to their issue price, ride them up and sell off quickly you can make money, holding them long term is not going to work. With the other high risk stocks and options it is fine to take 500 dollars each and make bets on 20 of these things hoping to get one winner. You might get lucky, but that is not investing.

It is entirely possible for the average person to do extremely well in the market, but you aren't going to do it swinging for the fences on every investment. If between dividends and increase in share price you can average 8%, you will double you money every 10 years. For every $50,000 you start with it will become $800,000 in 40 years. I bought 30 to 50 year Provincial Government Strip bonds back in the late 80s that were yielding roughly 10%, with zero risk. That means 30,000 invested in 1986, in a tax sheltered plan, is worth just over $450,000 today. You don't get rich fast but you will get rich if you keep doing those kinds of investments.

Interestingly enough, as of this morning lumber is off 25% from its highs and still dropping. I had said a couple of posts ago that I sold all my commodity type investments a while ago and the recent drop in lumber once again demonstrates that commodities are a place you can make money but they are not suitable for long term buy and hold portfolios. Long term buy and hold is restricted to Blue chip dividend paying Oligopolies or monopolies, Banks, Pipelines, and Utilities.

[Fisherdan]

Originally Posted by Dean2

I think what you guys are saying has a lot of truth. I do not consider investing gambling, sitting at the Casino or a game that is rigged so only the big players can win. Now on the other side of the coin, we do have those that are gambling, and that does apply to a large number of the new traders. When you go looking for 100 to 2000% gains over a few months, you are clearly gambling. Bitcoin is the clearest recent example, as is the Gamestop run up. The IPOs I posted above were issued at fairly reasonable valuations for the most part, but doubled and tripled or more shortly after issue, then dropped back to or slightly below their issue prices because their earnings and growth do not support their frenzy driven highs. If you can buy IPOs at close to their issue price, ride them up and sell off quickly you can make money, holding them long term is not going to work. With the other high risk stocks and options it is fine to take 500 dollars each and make bets on 20 of these things hoping to get one winner. You might get lucky, but that is not investing.

It is entirely possible for the average person to do extremely well in the market, but you aren't going to do it swinging for the fences on every investment. If between dividends and increase in share price you can average 8%, you will double you money every 10 years. For every $50,000 you start with it will become $800,000 in 40 years. I bought 30 to 50 year Provincial Government Strip bonds back in the late 80s that were yielding roughly 10%, with zero risk. That means 30,000 invested in 1986, in a tax sheltered plan, is worth just over $450,000 today. You don't get rich fast but you will get rich if you keep doing those kinds of investments.

Interestingly enough, as of this morning lumber is off 25% from its highs and still dropping. I had said a couple of posts ago that I sold all my commodity type investments a while ago and the recent drop in lumber once again demonstrates that commodities are a place you can make money but they are not suitable for long term buy and hold portfolios. Long term buy and hold is restricted to Blue chip dividend paying Oligopolies or monopolies, Banks, Pipelines, and Utilities.

This is a really good and sobering post. Just curious about your thoughts on oil, and Canadian oil companies? A lot of these companies (oil sands especially) have a target on their back politically. But oil just seems to be going up and up… I’m not sure if it’s going to stop anytime soon.

[Dean2]

Oil shares are something you can make good money on at the right times but they are not a long term buy and hold, just like all other commodities. I bought Whitecap, CNRL, Suncor, Freehold Royalties etc when they were at the bottom a few months back. A while ago I sold enough to get all my investment back and am now playing only with the profits. So for example, I bought Freehold at 3.00 and Ensign at 50 cents. Freehold is at 9.40 and ESI is at 1.15. I have a target price of 10.50 on Freehold, and 1.80 on ESI and when they hit those prices I will sell off all of what I am holding. IF they go higher fine, but that is the levels I am comfortable with in the current environment. You are correct that the long term is not good for oil and gas. It won't be too many years in the future that I completely divest all pipelines for exactly the same reason, and they have been a great long term buy and hold investment for over 60 years.

[roper1]

Originally Posted by Buckhead

I would agree. A time for extreme caution and diligence in one's choices of investments.
This isn't going to end well.

Agree with this but still need some risk. Like Dean & others have done, I've ventured a bit here & there, but sold enough that the riskier stuff is paid for. House money now, and some of it I traded for value. Bought Hydropothecary, sold Hexo after the change, it's all sitting in RBC.

[Buckhead]

Originally Posted by roper1

Agree with this but still need some risk. Like Dean & others have done, I've ventured a bit here & there, but sold enough that the riskier stuff is paid for. House money now, and some of it I traded for value. Bought Hydropothecary, sold Hexo after the change, it's all sitting in RBC.

Each person's risk tolerance is for that person to judge. Which is the reason why I don't post which stocks I am trading. What Dean and others do has very little influence on what I might or might not be doing or trading.
And I don't buy this concept of House money. When I put my capital at risk and earn a profit that isn't house money - that is now my money. I don't accept more risk because I earned a decent return.

[fishtank]

Originally Posted by Buckhead

Each person's risk tolerance is for that person to judge. Which is the reason why I don't post which stocks I am trading. What Dean and others do has very little influence on what I might or might not be doing or trading.
And I don't buy this concept of House money. When I put my capital at risk and earn a profit that isn't house money - that is now my money. I don't accept more risk because I earned a decent return.

Depending on the persons discipline, I find that once a person is set with a working strategy and it works don’t change it , don’t give in to temptation of the extra profit in new territories , stick with what you know best you will be rewarded eventually . As the saying goes Bear and bull makes money and pigs get slaughtered

[Dean2]

I want to make it VERY clear that I am not giving investment advice. I am not nor have I ever suggested anyone buy the shares I do or do things the way I do. I post what I do as information and have ALWAYS said, do your own research and match investments to your own risk profile and knowledge.


However to clarify a few points;

1. I am not a fan of the often touted "diversification" play. I want my investments in Canada and the U.S.. I have no interest in emerging markets, South America or most particularity China.
2. I am not a fan of wide diversification of stock holdings. I have and always have had 25% of my portfolio in two Canadian Banks. If I was forced to have only one investment it would be a Canadian Bank, partly because it is an industry I know inside and out, and partly because it fits my low risk, dividend paying, long term growth investment criteria. There is no point in having a portfolio comprised of stocks that are split so that half go up when the other half go down. All that does is hold you even. The whole point is to grow. Banking, pipelines and Utilities have been my three major areas for long term buy and hold, and I only hold a maximum of the three best companies in each category. With 20% in cash and long term bonds it isn't hard to figure out the allocations.
3. I do not believe in having all your wealth in the market. Real estate and other income earning hard assets are a key component too.

Now lets discuss buying and selling cyclical stocks like oil and gas and in my way of doing things this applies only to them, not to long term buy and hold shares. Lets say you buy 3000 shares Freehold Royalties at $3.50 for a total of $10,500, and they go to $7.00. You now have $21,000 worth of shares, ignoring the dividend re-investment program for the monthly dividend. You sell 1500 shares to recover your original investment. If you believed the shares were going to drop, you would of course sell off all of them.

So now, despite your belief the shares will continue to go up, lets say the shares drop back to 3.50. You still have a profit of $5,250. Had you not sold those shares, you would now have zero profit. After selling the shares the remaining shares have to go to zero before you have no profit at all, whereas had you not sold, as soon as the price drops below $3.50 you actually have a loss.

So now, lets assume you were correct and the shares continue to increase in value and get to your target price of $10. You will add another $4,500 in profit when you sell the remaining 1,500 shares you are still holding, for a total profit of $15,000 on your $10,500 original investment. Selling off the shares and investing the so called "House" money is not about taking more risk, it is about limiting your downside risk while leaving room for further upside potential. I hope this helps clarify a few things.

[Dean2]

One other point I tried to add but the edit window ran out.

3. In the good old days when I could earn 10%+ on virtually risk free AAA rated government strip bonds, that formed a very big chunk of my investment portfolio. Unfortunately, those days don't exist anymore so I made adjustments because inflation stays in the 2-4% range no matter what. Thus 100,000 40 years ago, stuffed into a mattress, is worth WAY less than it was in 1980. You would need $400,000 today to barely break even in purchasing power. Back in 1980 you could have lived for many years on $100,000, you sure can't today.

Also, the fact that you have to earn nearly twice as much interest as you do dividends to break even after tax has changed the investment environment. A 4% dividend is worth about 7% in interest for the average guy and the higher you tax bracket the higher the interest rate you need to earn. If you have no other income, you can earn about $45,000 a year in dividends virtually tax free. On a million of dividend paying stock, that is doable, the same amount in GICs would pay you about $15,000 a year right now.

[Twisted Canuck]

Well, finally a tiny move on inflation numbers. I still don't believe it personally, I think it has to be higher for all the obvious reasons that Dean has repeatedly pointed out. And I don't expect the BOC to do anything with rates anyway. The government can't afford to borrow (print) as much cheap money if borrowing rates suddenly go up. Would mess with JT's Magic Money Tree.

https://www.ctvnews.ca/mobile/busine...cade-1.5434225

[roper1]

Originally Posted by Buckhead

Each person's risk tolerance is for that person to judge. Which is the reason why I don't post which stocks I am trading. What Dean and others do has very little influence on what I might or might not be doing or trading.
And I don't buy this concept of House money. When I put my capital at risk and earn a profit that isn't house money - that is now my money. I don't accept more risk because I earned a decent return.

Fair enough. I use different guys for different reasons. Most of my stuff is blue chip dividend. I have, however, done quite well on some venture-type stuff over the years. Nat gas, lumber, oil, live cattle contracts. Hexo, Bigg, a few others. I'm posting stocks which I traded awhile back. Lost some coin buying Canntrust on the pullback.

I wouldn't consider chatting with you trading advice I'm giving out. I can, however, point out that some type of investing has helped a lot more people than it has hurt. We're talking Vid percentages here.

[ghfalls]

I’d like to says thank you Dean, for all of the great posts you consistently make. I know sweet nothing about the markets and appreciate that you share your knowledge on the forum. Taking notes.
Thanks

[RandyBoBandy]

Originally Posted by ghfalls

I’d like to says thank you Dean, for all of the great posts you consistently make. I know sweet nothing about the markets and appreciate that you share your knowledge on the forum. Taking notes.
Thanks

X2

[Buckhead]

Originally Posted by roper1

Fair enough. I use different guys for different reasons. Most of my stuff is blue chip dividend. I have, however, done quite well on some venture-type stuff over the years. Nat gas, lumber, oil, live cattle contracts. Hexo, Bigg, a few others. I'm posting stocks which I traded awhile back. Lost some coin buying Canntrust on the pullback.

I wouldn't consider chatting with you trading advice I'm giving out. I can, however, point out that some type of investing has helped a lot more people than it has hurt. We're talking Vid percentages here.

Investing is about compounding returns over many years. It is not some secret alchemy that others need to be lectured about. Posting stocks that I have made money on in the past would only seem like bragging on my part - it doesn't seem to serve any real purpose and it certainly isn't going to help anyone else be a better investor because it is not a discussion of the current market conditions.

I wouldn't consider chatting with you regarding my investment decisions either. When did I ask for advice?

You don't need to point out that investing is helpful to people. I have earned a positive return on my investments for 34 of the last 35 years. I probably don't need any basic investing lessons.

[roper1]

Originally Posted by Buckhead

Investing is about compounding returns over many years. It is not some secret alchemy that others need to be lectured about. Posting stocks that I have made money on in the past would only seem like bragging on my part - it doesn't seem to serve any real purpose and it certainly isn't going to help anyone else be a better investor because it is not a discussion of the current market conditions.

I wouldn't consider chatting with you regarding my investment decisions either. When did I ask for advice?

You don't need to point out that investing is helpful to people. I have earned a positive return on my investments for 34 of the last 35 years. I probably don't need any basic investing lessons.

My delivery or your reception is off!! I never said anything in the form of lecture. You're up more than the market if you're up 34 out of the last 35. Possibly even bragging. I don't think it's apology worthy on my part, hell I was just chatting on a related thread. You have a fine evening!!!!!!!

[Dean2]

Even Alberta is showing signs that inflation in building costs is starting to hit the new home prices. It will be interesting to see if there is net migration into Alberta, Saskatchewan and Manitoba looking for cheaper housing.

ATB Economics | May 25, 2021
New house prices on the rise in Alberta



The average price of newly built homes in Alberta was on a downward trend before the pandemic, but has picked up some steam in recent months.

As of February 2020 (the month before the pandemic was declared), the new home price index for Alberta was 2.6 per cent below where it was in December 2016.

The price index barely moved during the pandemic in 2020, but it did get as low as 3.3 per cent below the baseline set in December 2016.

The index ticked up slightly in each of the first four months of 2021 to reach its highest level in six years. The increase, however, was modest at just 1 per cent above where things stood at the end of 2016.

The paths taken by the new housing price index in Calgary and Edmonton are similar to the one for Alberta as a whole.

The upswing in the index can be attributed to the combined effects of higher lumber prices, increased activity in the resale market and the durability of demand for new housing despite the pandemic.

Driven by sharp price increases in markets such as Ottawa, Montreal and Vancouver, the situation in the county as a whole is very different from what’s been happening in Alberta. The national index rose over the first half of 2017 and then plateaued until the pandemic began. Since then, it has shot up by about 10 per cent compared to February 2020.

Answer to the previous trivia question: Queen Victoria reigned for 64 years.

Today’s trivia question: How many landlocked provinces are there in Canada?

[fishtank]

Well house for sale in the neighbourhood seem to on the market less then 30 days , seeing Sold sign on most of it . A few are redevelopment permit into duplex or skinny homes .

[bdub]

A big inflation sign is rising wages in the U.S. Hard to believe but employers are facing a labor crunch in many sectors and many large companies have already had to increase wages to get labor. Its just getting started. It affects inflation on the demand and supply side, double whammy. Higher wages affect costs for goods and services for everybody and higher wages increase demand for goods overall.

Banks, service industries, restaurant business are the first ones to announce increases but it will trickle through to all industries before long.

[Buckhead]

[QUOTE=Dean2;4377816]Even Alberta is showing signs that inflation in building costs is starting to hit the new home prices. It will be interesting to see if there is net migration into Alberta, Saskatchewan and Manitoba looking for cheaper housing.


One can only hope. After 15 years of depressed housing prices some increase might be good for a lot of people.
Prairies housing price index (house only):
September 2007 = 102.9
April 2021 = 102.8

[Buckhead]

So now, lets assume you were correct and the shares continue to increase in value and get to your target price of $10. You will add another $4,500 in profit when you sell the remaining 1,500 shares you are still holding, for a total profit of $15,000 on your $10,500 original investment. Selling off the shares and investing the so called "House" money is not about taking more risk, it is about limiting your downside risk while leaving room for further upside potential. I hope this helps clarify a few things.[/QUOTE]

All speculation has increased risk. And that is what you are doing - speculating using a profit taking and a bit of hedging strategy. If there was no increased risk you would not be employing this strategy you would just be holding until the stock hit your target price. Of course it is about limiting downside risk. Never said it wasn't.
I have done and do the same thing at certain times. But I am still not calling it "House" money. Those are profits I earned by putting my capital at certain risk level that I might be comfortable with. Just like life in general investing comes with certain amount of risk. One can employ strategies to lower to the risk but it is not ever going to be zero.

[Twisted Canuck]

A good interview with Stephen Jarislowsky. The guy is in his 90s, and still sharp. I've appreciated his investment philosophy for quite a few years.

https://www.bnnbloomberg.ca/high-fly...arns-1.1610785

[MooseRiverTrapper]

Canadian oil and gas. It’s where it’s at.

[bdub]

Originally Posted by MooseRiverTrapper

Canadian oil and gas. It’s where it’s at.

Oh yeah. Oils got a long way to go yet I’m betting. Last summer/early fall oil was the most hated sector going. Not any longer with WTI looking like its going to stay pretty solidly above 60$ and WCS hanging in not far behind.

[Jim Blake]

The Market is roaring this morning. Oil up over 2 bucks today and the TSX was over 20,000 for a while.

[Dean2]

You are spot on Jim.

Just a heads up for those following this thread, Pembina Pipe just agreed to buy Inter Pipe in a friendly deal at 19.25 a share, all share deal. That is a steal of a deal for PPL, they basically got Heartland 75% finished for free. Once Heatland came on stream IPL was easily worth 25-28 and it comes on in 2022. This will be massively accretive for PPL. I bought a large block of PPL this morning as it took the usual big dip on the announcement, and I will end up with more PPL once the swap for the IPL shares I hold happens. This is also a big jump up in dividend from what IPL was paying monthly. (PPL pays out monthly too). Good option for folks looking for monthly income to live on.