Financial Markets Meltdown

[Twisted Canuck]

Well, it was bound to happen, the coronavirus is just a convenient trigger....looks like the Dow Jones has shed roughly 1700-1800 points since opening bell yesterday. TSX also down similar. Some folks gonna take a beating. And, as always, some folks are going to get rich. I can't help thinking how make-believe it all seems sometimes, as billions or trillions of dollars 'evaporate'...Will be interesting to see where it lands.

[Map Maker]

We were at all time high for quite a while.
Most people took profits.
Billions evaporate, that were not really there to begin with.

Of course it will over correct and there will be buying opportunities if you can pick the bottom.

[Selkirk]

.
I've been waiting for something like this to happen for a long time now (market meltdown).

If this keeps up, it will soon be a Great Time to 'Buy' ❗

Selkirk

[pikergolf]

I'm about 65% cash, now to find the bottom.

[Justfishin73]

Who told you guys to bail at 29,500? Damn glad I did

[Scott N]

My investments are for long term, so I'm trying not to even look at this news.

[Selkirk]

Originally Posted by pikergolf

I'm about 65% cash, now to find the bottom.

By the time you "find the bottom", you'll only see it in the rearview mirror.

'Dollar Cost Averaging' is the better way to go.

Selkirk

[Trochu]

I've been wanting to buy Ford for quite awhile now, curious how low it will go before it bounces back.

[Twisted Canuck]

Originally Posted by Scott N

My investments are for long term, so I'm trying not to even look at this news.

Exactly. I'm not sweating it. My portfolio is diverse large cap blue chip dividend paying. Those companies aren't going anywhere. I could care less what the share price drops or climbs to any given day. As long as I'm not selling, I'm not losing. Just the dividend income is enough to float part of my boat in a pinch. All gets re-invested anyway.

When the markets crashed in 08 and everyone was getting killed, returns were still over 7%. Conservative, safe and boring.

[Dean2]

I know Justfishin has all his stuff in tax free accounts like RRSP and TFSA so getting in and out may make sense if he can manage to get back in somewhere near the bottom. For the majority of the long term buy and hold investors the tax consequences means getting in and out doesn't work.

Let me see if numbers can make the case more simply.

If I am holding 100,000 in ENB stock and my cost on that stock is 30,000 ($16.50 cost on what is now a $55 stock, that is also yielding me 19.7% dividend on my original investment, paid quarterly), I pay the government $17,500 in tax on the gain. That is a 17.5% drop in capital and I also lose the 20% dividend. Dividend income, because of it preferred tax treatment is a very effective form of earning money. A couple can basically earn $84,000 a year tax free if all their income comes from dividends. Not something you want to give up.

Even if ENB drops 20% from today's price, I will basically have broke even with having sold out and paid the tax. The problem with selling out and paying the tax is, I now only have $85,000 to buy back in with. No matter how you cut it, selling out your gains costs you a min of 25% of the gain, and that is a permanent reduction in capital. It also means that when you buy back in at $43, you will have another taxable position on that gain as the stock climbs back to $55, so the whole theory of avoiding downdrafts does not bear out unless everything you are transacting is in tax free accounts.

I do however have some cash on the side to deploy as some top quality stocks are going to be a deal as this market drop keeps up.

[ORV]

Originally Posted by Scott N

My investments are for long term, so I'm trying not to even look at this news.

x2 but I still do anyway

Ouch! lost lots since last week & it is not hi risk stuff

Orv

[fishtank]

I think a lot of companys are going to send out new earning estimates cuts ... Apple. MasterCard Carnival and canadagoose are just to name a few .. as this viruses hit China that manufacture the goods and disruption to supply chain , the shut down of airlines and travel get hit again ... carnaval cruise Line is going to get hit hard. Due to the bad rep from the diamond princess, the Middle East and Europe are staying to get hit as well. And not to mention it might have already made it to the USA . Expect this to the perfect storm/ black swan . Sitting at 80% cash and 20% gold stocks

[Bergerboy]

Lots of good buys out there right now. Time to burn some dry powder.

[Dean2]

Originally Posted by Bergerboy

Lots of good buys out there right now. Time to burn some dry powder.

I would not be in a rush unless you are putting in buy orders with limit prices 15% below current levels.

[fishtank]

Originally Posted by Dean2

I would not be in a rush unless you are putting in buy orders with limit prices 15% below current levels.

Long term investor. Don’t have to worry cause. The market tends to trend up as always . At lease get in on some dividend payments .

[Selkirk]

Originally Posted by Bergerboy

Lots of good buys out there right now. Time to burn some dry powder.

If this meltdown continues, it could be 'Buying Time' sooner than I thought ❗

Reuters News link 👉 https://ca.reuters.com/article/busin.../idCAKBN20J2MP

Selkirk

[59whiskers]

Picking up up a few deals now cheaper than I bought in the past. We are not at the bottom yet. Lots of cash is a good thing now.

[Twisted Canuck]

Originally Posted by Dean2

I know Justfishin has all his stuff in tax free accounts like RRSP and TFSA so getting in and out may make sense if he can manage to get back in somewhere near the bottom. For the majority of the long term buy and hold investors the tax consequences means getting in and out doesn't work.

Let me see if numbers can make the case more simply.

If I am holding 100,000 in ENB stock and my cost on that stock is 30,000 ($16.50 cost on what is now a $55 stock, that is also yielding me 19.7% dividend on my original investment, paid quarterly), I pay the government $17,500 in tax on the gain. That is a 17.5% drop in capital and I also lose the 20% dividend. Dividend income, because of it preferred tax treatment is a very effective form of earning money. A couple can basically earn $84,000 a year tax free if all their income comes from dividends. Not something you want to give up.

Even if ENB drops 20% from today's price, I will basically have broke even with having sold out and paid the tax. The problem with selling out and paying the tax is, I now only have $85,000 to buy back in with. No matter how you cut it, selling out your gains costs you a min of 25% of the gain, and that is a permanent reduction in capital. It also means that when you buy back in at $43, you will have another taxable position on that gain as the stock climbs back to $55, so the whole theory of avoiding downdrafts does not bear out unless everything you are transacting is in tax free accounts.

I do however have some cash on the side to deploy as some top quality stocks are going to be a deal as this market drop keeps up.

Excellent analysis. I had somebody explaining to me how stupid I was to hold, and not panic sell. Of course the person who was telling me I was stupid has a net worth of a 2001 dodge ram with 200,000 km on it, and a tool pouch on the passenger seat....

Anyway. Ride it out, take the dividends, max out the TFSA, and wait for the smoke to clear. That's my personal position.

[Red Bullets]

Just reading this thread... an observation... no point, just and observation.

On any given day one person is selling their stocks and another person is buying their stocks. The odd thing is that both people think they are savvy and intuitive investors.

[Justfishin73]

This aint over yet

[The Elkster]

I think most here are grossly underestimating the impact of this virus event. Good luck to those who stayed in.

[Dean2]

Originally Posted by The Elkster

I think most here are grossly underestimating the impact of this virus event. Good luck to those who stayed in.

So to be clear. For most longterm buy and hold investors, the market has to come off 20 percent and in many cases up to 50 percent, as in drop to half where it is now, before it would make sense to sell, pay the tax and sit on the sidelines till you are sure the market has bottomed. The larger your accumulated gains the more the market needs to drop before you break even, let alone end up ahead by selling out. Each person needs to do a detailed analysis, specific to their individual situation. You need to know exactly how far your individual stocks will have to drop for it to make sense to sell. Even of the market comes off 40% it doesn't mean the stocks u are holding will do that bad or they could do far worse.

To just advise to sell out because things are gong to be bad is just way too simplistic and if you investment advisor is giving u that kind of advice then you need to fire him.

[Twisted Canuck]

Originally Posted by Red Bullets

Just reading this thread... an observation... no point, just and observation.

On any given day one person is selling their stocks and another person is buying their stocks. The odd thing is that both people think they are savvy and intuitive investors.

Absolutely true. Well, sort of. I don't think I'm that savvy. But I think the people who manage my portfolio are very savvy.

Originally Posted by The Elkster

I think most here are grossly underestimating the impact of this virus event. Good luck to those who stayed in.

Luck? Meh.....it the virus comes to kill us all, what difference does it make? If it doesn't...what difference does it make? Markets are gonna market. If it takes 2 or 3 or 5 years to make a "comeback" ....I will have time, or I won't. The only certainty in life is death, and taxes, as has been stated ad nuaseum.....

[Buckhead]

Yawn. What Meltdown. Wake me up when the markets are all down 25%. Maybe then I can get excited.

[JD848]

Originally Posted by Twisted Canuck

Absolutely true. Well, sort of. I don't think I'm that savvy. But I think the people who manage my portfolio are very savvy.



Luck? Meh.....it the virus comes to kill us all, what difference does it make? If it doesn't...what difference does it make? Markets are gonna market. If it takes 2 or 3 or 5 years to make a "comeback" ....I will have time, or I won't. The only certainty in life is death, and taxes, as has been stated ad nuaseum.....

x2 Very well put.

[The Elkster]

Originally Posted by Dean2

So to be clear. For most longterm buy and hold investors, the market has to come off 20 percent and in many cases up to 50 percent, as in drop to half where it is now, before it would make sense to sell, pay the tax and sit on the sidelines till you are sure the market has bottomed. The larger your accumulated gains the more the market needs to drop before you break even, let alone end up ahead by selling out. Each person needs to do a detailed analysis, specific to their individual situation. You need to know exactly how far your individual stocks will have to drop for it to make sense to sell. Even of the market comes off 40% it doesn't mean the stocks u are holding will do that bad or they could do far worse.

To just advise to sell out because things are gong to be bad is just way too simplistic and if you investment advisor is giving u that kind of advice then you need to fire him.

Every case is different and I don't advise anyone to do anything without carefully considering their own situation. I'm just warning that this is not likely to be a normal correction. I'd be leery about buying the dip. Preserving cash is not a bad thing right now. Penny saved is a penny earned.

[Dean2]

Originally Posted by The Elkster

Every case is different and I don't advise anyone to do anything without carefully considering their own situation. I'm just warning that this is not likely to be a normal correction. I'd be leery about buying the dip. Preserving cash is not a bad thing right now. Penny saved is a penny earned.

Very prudent and fair comment. If it gets really bad, some cash in the mattress might be quite handy too.

[Twisted Canuck]

Originally Posted by Dean2

Very prudent and fair comment. If it gets really bad, some cash in the mattress might be quite handy too.

If it gets as bad as all that, I'm gonna say tinned goods, toilet paper, lots of ammo, and some gold and silver is where it is at. And some good wine and whisky of course.

I am covered on all counts....

[KGB]

You know one of the major rules for the market? DO NOT TRY TO TIME THE MARKET, it is simply impossible. You may be correct on one end but you will miss on another. If your timing is 2-10 years- just sit tight.

[The Cook]

Originally Posted by Justfishin73

This aint over yet

A very big storm($$) is looming and it will be a long hard ride.