Financial Markets Meltdown

[fishtank]

Originally Posted by Jim Blake

Just wondered what the thoughts are on whether we are in a Depression, heading for a Depression or in a Recession?

will know by the end of the year

[Jim Blake]

Originally Posted by fishtank

will know by the end of the year

Yes, I'm sure by then we will. LOL

[Dean2]

Originally Posted by fishtank

will know by the end of the year

We are already in recession, which is two quarters of negative economic growth, usually measured at the GDP level. You may or may no have deflation in a recession. The difference between recession and depression, depression lasts for a year or more, and the magnitude of the effects are larger. The current recession shows many of the same outcomes as the great depression which were, 25% unemployment, house prices off 20% or more and general prices off 10%. We already have those levels of unemployment, some prices are way off previous highs, gas, travel, luxury goods but others are actually increasing. House sales have dropped like a stone and in some areas like Alberta, Sask prices were already off 20%. Whether they will drop another 20 and do that across Canada is yet to be seen.

Very low interest rates help but households are already highly levered. The high unemployment may more than offset and people are hoarding cash so depending on how long the drop in spending lasts, the effects on housing and everything else could be severe. Both Canada and the US., 70% of our economies are driven by consumer spending. If consumers stop spending we will see a depression for sure.

[bdub]

Originally Posted by Jim Blake

Just wondered what the thoughts are on whether we are in a Depression, heading for a Depression or in a Recession?

100% we are in a recession, perhaps not quite yet by the technical definition, but guaranteed we are in one and the numbers will show it soon. 1Q US GDP came in at -4 something %. Some guys are saying 2Q GDP is going to in the -30% range annualized so the chance of us being technically in a recession is certain.

A depression is a sustained recession lasting many quarters and leading to a substantial drop in GDP in that time. I don't recall the exact numbers. Whether we are heading into a depression is anyone's guess here. Certainly possible. Depends on when and what the recovery looks like.

In the GFC we lost about 9 million jobs in the US. During the recovery from 2009 we gained about 22 million jobs. In the last few weeks the States has lost 30 million jobs. That's some pretty bad numbers. Great depression type stuff for sure. There is other data reflecting expenditures and confidence that are definitely very ugly. And a global slowdown was already well underway pre-covid.

[bdub]

On top of the Depression/Recession talk the States is now talking about reparations against China For their handling of the covid. Same type of idea that drove Germany to the brink and ended up starting WW2. This time however they are talking about reneging on the US debt held by China, among other things. No matter if this is just bluster and deflection, there is no doubt the relations with China and the west is going to continue to deteriorate leading to a huge and continuing disruption in the global supply chains. Get ready for inflation in some parts of the economy and deflation in others. Also the reaction of people may be altered post-covid for some time. Less spending and more saving as people will be financially shell shocked by this event imo.

https://www.washingtonexaminer.com/o...ound-the-world

[Jim Blake]

Yes I agree we sure are in a Recession, but I'm thinking we are walking into a Depression.

I believe the jobless rate will surpass the 25% mark if it hasn't already. The survey on Families/People that were 200 bucks away from not being able to pay their bills pre-Covid was a very high percentage. Now it would be even greater. I believe housing prices will drop another 10-15% and more in the hot markets like Toronto.

I believe consumer spending will fall even more as the year progresses. I would like to hear a good reason why it wouldn't. First quarter earnings and Statistics don't capture the full picture of the Covid Crisis, just the beginning, so the next quarter I believe will be more of an eye opener.

Low energy prices, which Canada is a major player is forecast to continue for a year or year and a half. Investor confidence in Canada is at an all time low.

I don't believe these bailout packages are sustainable much past mid-year without mega-serious repercussions. In my mind a Govt. can't keep the whole Country afloat artificially for a year without unimaginable consequences.

Lots of things to factor in and lots of unknowns, but it sure looks like a Depression coming up to me.

Also good to see some different points of view and observations.

[W921]

Originally Posted by Dean2

You and many others are missing the magnifying effects of the huge chunk of liquidity that has been introduced into the markets world wide. Trillions of dollars injected by Government and Central Banks will distort the markets to the upside. Earnings drops and recessions are temporary, this injection of liquidity is not, it is permanent. It is a form of inflation but not centered on the price of real goods. Now the whole debt generated by it also means that interest rates will have to stay low for a REALLY long time and this will further distort stocks to the upside as there is no other place to get yield.

Stocks will begin reacting to earnings and business fundamentals again only when the governments quit pumping billions a day into the general economy.

So won't government's have to devalue dept by printing more money?
If governments could just choose to keep interest rates low then why didn't Jimmy Carter do that in 79?
I know the bank of Canada sets interest rates but if no one buys or bonds then they have to raise interest rates????
If mortgage rates hit 9 or 10% in a few years its going to be horrible for a lot of people. If they go 20% like 40 years ago ,well I can't even imagine it.

[W921]

I didn't mean to put that face thing boxing on my last post.

[Dean2]

Originally Posted by W921

So won't government's have to devalue dept by printing more money?
If governments could just choose to keep interest rates low then why didn't Jimmy Carter do that in 79?
I know the bank of Canada sets interest rates but if no one buys or bonds then they have to raise interest rates????
If mortgage rates hit 9 or 10% in a few years its going to be horrible for a lot of people. If they go 20% like 40 years ago ,well I can't even imagine it.

Interest rates is a very complicated and long dissertation. Short form, Central Banks set a benchmark rate that establishes gov rate on their bonds. If you are Venezuela you have to set a high rate due to default risk. US and Canada, not so much. The reason rates spiked in 79 was to control inflation, not due to Canada gov default risk or lack of demand for gov bonds. With consumer demand shrinking this hard deflation is a far bigger risk than inflation. If we get to the point where US and Canada are a default risk and drive rates way up we and most of the world are all pretty much screwed. If Venezuela defaults the rest of the world isn't really affected.

This a a tremendously rudimentary explanation and anyone that wants to write a long and detailed post better explaining how interest rates work please do so.

[W921]

Originally Posted by Dean2

Interest rates is a very complicated and long dissertation. Short form, Central Banks set a benchmark rate that establishes gov rate on their bonds. If you are Venezuela you have to set a high rate due to default risk. US and Canada, not so much. The reason rates spiked in 79 was to control inflation, not due to Canada gov default risk or lack of demand for gov bonds. With consumer demand shrinking this hard deflation is a far bigger risk than inflation. If we get to the point where US and Canada are a default risk and drive rates way up we and most of the world are all pretty much screwed. If Venezuela defaults the rest of the world isn't really affected.

This a a tremendously rudimentary explanation and anyone that wants to write a long and detailed post better explaining how interest rates work please do so.

Guys like Michael Reagan and Gordy Liddy were flipping out about U.S. dept long before this covid thing. Are we not past the point where the only way America can pay back their dept is by devaluing their currency? If they do this then won't we get inflation?
Example Canada will have to keep its interest rates in line with the Americans or we won't be able to service our dept?
I really hope my understanding is all wrong about this but I really fear high interest rates in the years to come. Even if its 5 years from now its a death sentence.

[Dean2]

Originally Posted by W921

Guys like Michael Reagan and Gordy Liddy were flipping out about U.S. dept long before this covid thing. Are we not past the point where the only way America can pay back their dept is by devaluing their currency? If they do this then won't we get inflation?
Example Canada will have to keep its interest rates in line with the Americans or we won't be able to service our dept?
I really hope my understanding is all wrong about this but I really fear high interest rates in the years to come. Even if its 5 years from now its a death sentence.

Even at zero and negative interest there is no shortage of demand for US bonds. Same is true for most of the G8. Personally I would love to be able to get 6 or 7% interest on govt bonds, GICs, and other relatively risk free investments. If folks could actually earn a reasonable income off their savings there would be a lot more happy folks, especially retired people. Unfortunately you won't see this happen. Govts want to hold down debt service costs. If they can pay you back ten year down the road with no interest cost in between that don't need to devalue their currencies. You are lending them money for free against income they earn ten or more years from now.

[fishtank]

Welcome to May 1st ... going to be a interesting month. Personally still not taken any long positions just trading The ups and downs days . Also Canada just found a replacement for poloz. The next governor of BOC will be TIff macklem

[bdub]

Some market moving news out of Berkshire Hathaway meeting. Looks like Warren Buffett dumped all his airline stock and hasn’t done any significant buying during the crisis. Doesn’t see any good deals yet. Probably going to set the tone for the week ahead.

https://www.cnbc.com/2020/05/02/warr...ronavirus.html

[Justfishin73]

Well, averaged 22% since getting back in about 8 weeks ago, but things are starting to look toppy, might be time to sit in a money market for a bit to let the dust settle. Just getting that feeling........

[bdub]

Got to like that JF. I agree it's feeling pretty toppy here again and has been bumping along this 60% ish retrace for some time now. I would not be surprised to see us take another big drop, perhaps to the March low again.

The market based on expected forward earnings is trading beyond expensive.
It seems to be living on hope and being held up by liquidity. It's definitely pricing in a more optimistic outcome for the next 6 or so months than what I would have expected so far. Perhaps the wall of coming insolvencies will be the real killer of it.

Yesterday was a perfect example of how fickle and bi-polar it is during this crazy period. The markets (U.S) were up 3+% on J. Powell's appearance on 60 minutes the night before and the Moderna vaccine news coming out at 5AM. Today Moderna did a 1.3B equity raise. That was followed by some not so great news on their vaccine trial which dumped the market right at the close today. J. Powell's talk on 60 minutes was interesting and is worth a watch, as well as some of his comments that were edited out of the show. Basically they are going to spend like mad and don't worry about the debt because unemployment is going to 30+% and we're all screwed anyway.

What I'm wondering and wish I knew for certain is if we are heading for deflation or inflation. Or perhaps we are heading back to something like normal and we get a V-shaped recovery. Who knows but this endless money creation and rescuing everyone and thing whether they deserve it or not is going to have some significant unforeseen negative consequences imo. Dr. Lacy Hunt has been warning on the debt cycle for the last few years and has been bang on so far with his calls. Worth a listen to even if you don't agree with all his points.
Good Luck.

[Flatlandliver]

Originally Posted by Justfishin73

Well, averaged 22% since getting back in about 8 weeks ago, but things are starting to look toppy, might be time to sit in a money market for a bit to let the dust settle. Just getting that feeling........

It’s a recession when your neighbours go broke, it’s depression when you go broke.

[Justfishin73]

Great day on the Nasdaq, the run continues.....

[Dean2]

So, how many guys are still sitting on cash waiting for the market to retest the March 23 lows?Who is still waiting for the Canadian Banks to take a big drop based on forward loan losses? What will be your trigger to get back into the markets?

[Bergerboy]

Originally Posted by Dean2

So, how many guys are still sitting on cash waiting for the market to retest the March 23 lows?Who is still waiting for the Canadian Banks to take a big drop based on forward loan losses? What will be your trigger to get back into the markets?

I myself got in and out and have moved back to cash. I think the v shaped recovery is too dependent on investor hope for a quick cash grab and is not reflecting the market well. I feel there is gong to be significant financial blow back from the Covid malarkey and there will be another large drop before fall. As per a trigger, I am at a loss on that one. This is going to be a weird ride I think.

[Jigsalot]

Originally Posted by Bergerboy

I myself got in and out and have moved back to cash. I think the v shaped recovery is too dependent on investor hope for a quick cash grab and is not reflecting the market well. I feel there is gong to be significant financial blow back from the Covid malarkey and there will be another large drop before fall. As per a trigger, I am at a loss on that one. This is going to be a weird ride I think.

I agree with you. I’m still sitting on the sidelines and I’m really stunned at the market movement lately. All countries are going broke yet the investment game is recovering for some reason. Also considering getting all out of the markets and buying another rental property. Reason being any virus in the fall or future it will trigger another crash in the markets. Seems the only country that is rebounding nicely is China 😡. They make a fortune every day on PPE every day

[fishtank]

Originally Posted by Bergerboy

I myself got in and out and have moved back to cash. I think the v shaped recovery is too dependent on investor hope for a quick cash grab and is not reflecting the market well. I feel there is gong to be significant financial blow back from the Covid malarkey and there will be another large drop before fall. As per a trigger, I am at a loss on that one. This is going to be a weird ride I think.

Same just small nibbles and day trades . A big chunk of it still cash I basically just playing with the profit and throw it back in.

[pikeman06]

I'm still sitting on my stack. Never made a move at all, but I sure admire the guys that got in and out and probably made a quick 15 to 20 percent. Never seen the likes of it. Banks are down on earnings. Id probably grab some bmo and similar stocks at the end of the this quarter if there's even a slight uptick. All this loan deferral buisness makes it tough to get a true feel. We shall see. Getting cautious as I get older. Don't wanna bugger up my retirement I been scrimping and saving for.

[fishtank]

Originally Posted by pikeman06

I'm still sitting on my stack. Never made a move at all, but I sure admire the guys that got in and out and probably made a quick 15 to 20 percent. Never seen the likes of it. Banks are down on earnings. Id probably grab some bmo and similar stocks at the end of the this quarter if there's even a slight uptick. All this loan deferral buisness makes it tough to get a true feel. We shall see. Getting cautious as I get older. Don't wanna bugger up my retirement I been scrimping and saving for.

the way the market moves it a daytraders dream for the last few months ...


and now china and the US is back at it ...

canada decision on the huawei princess is going to cause canadian farmers alot more damage ..

[Drewski Canuck]

Originally Posted by fishtank

the way the market moves it a daytraders dream for the last few months ...


and now china and the US is back at it ...

canada decision on the huawei princess is going to cause canadian farmers alot more damage ..

Well not really!!!

It seems that when our Canola was rejected by China for being full of weeds and other bad stuff, it was then sold to another Country. This other Country then took our canola, and delivered it to .... CHINA!!!

So you see, there still is a demand, but it will require a middle man.

Drewski

[Dirtdiver23]

Originally Posted by Drewski Canuck

Well not really!!!

It seems that when our Canola was rejected by China for being full of weeds and other bad stuff, it was then sold to another Country. This other Country then took our canola, and delivered it to .... CHINA!!!

So you see, there still is a demand, but it will require a middle man.

Drewski

Drew
It still kills the price of canola when they do that ! We as farmers have lost $1-1.50 per bushel since this China bs started.
Dirty

[Zip-in-Z]

More Green than Red today & the Loonie's going up ....





Air Canada doesn't look good.

[Glion]

Had some sell orders out today to get more into cash again, had pulled most out just before christmasish. Bought a little few weeks ago some RB and some.royal carribean cruise the cruise line is doing excellent for me so far

[Dean2]

So the market distorting activity of various levels of Government continues. Circ De Soleil just got a $275 million loan from the Gov of Quebec. The former owner became a Billionaire selling out 100% of his interest in the company, and the company loaded up on debt to buy him out. Now they can't service the debt so the old owner is trying to buy it back for ten cents on the dollar.

If anyone wonders why the market is shooting straight up despite all the bad economic news just look at the Trillions of dollars of liquidity that have been flushed into the system. That money has to go somewhere. Bonds yield close to zero, hard assets are work to manage so the Stock Market is all that is left. If you try to relate market performance to the earnings structures and performance you will miss the whole point of what is going on. Look for stocks that benefit from this large injection of liquidity.

You guys that are still on the sidelines have missed 30% run up in share prices. That is why I asked, what will your trigger be to get back in. Everyone says they want to buy stocks cheap, but even when stocks were 40 and sometimes 50% off, guys still didn't think they were a good deal. I posted a list of companies to check out a couple of pages back

April 11-2020 Dean2

For the guys that have asked, here are the specific companines I favour in each category.

These are strictly how I have prioritized things, this is not advice for others as it may be completely wrong for your situation and risk tolerances. Consult a qualified financial advisor, if you can actually find one.

Industries - Industries and Stocks are in order of preference by me.

Banks in Canada - see above. NOT U.S. or European Banks
RBC, TD with a small position in National Bank

Utilities - wide service areas with a large percentage of clients on regulated rates
Fortis, Canadian Utilities, Capital Power, Alta Gas

Telecom - Pick those that have the large networks and multi pronged business like network, internet, T.V. Cloud etc
Telus, Rogers, BCE (Bell Media)

Payments - Visa and MasterCard

Tech - Amazon, Microsoft

Retail - Grocery Stores
Loblaws, Kroger,

Mega Retailers with strong online presence
Walmart, Costco, Canadian Tire

Energy Infrastructure - Pipelines - these have very good dividends but they are also exposed to oil price risk so not nearly as risk free as Utilities.
TransCanada Pipe, Enbridge, Pembina Pipelines

REITs - apartment and single family only and preferably no more than 20% in Alberta and Sask. Those holding office space, retail space and many commercial properties are going to have a real rough ride the next few years.
Canadian Apartment Reit, Northview Apartment Reit, Interrent Reit - definitely NOT Boardwalk Reit which is 74% Alberta and Sask.

Like I said above, these are the ones I like, please do your own research to see if you like them too.

Take a look at what the price was April 11th when I posted this and what they are today. How many times does Royal Bank need to drop back to $80 and TD to $50, (RBC is at $92, TD is at $61 today) for people to think it is a good deal at that price. That is why I ask what the trigger will be that says it is time to get back in?

[Map Maker]

Originally Posted by Dean2

You guys that are still on the sidelines have missed 30% run up in share prices. That is why I asked, what will your trigger be to get back in. Everyone says they want to buy stocks cheap, but even when stocks were 40 and sometimes 50% off, guys still didn't think they were a good deal.

Take a look at what the price was April 11th when I posted this and what they are today. How many times does Royal Bank need to drop back to $80 and TD to $50, (RBC is at $92, TD is at $61 today) for people to think it is a good deal at that price. That is why I ask what the trigger will be that says it is time to get back in?

Hindsight is always 20/20.
The big difference is how much your putting back in. Like gilion above bought into cruise ships, that was a big risk and perhaps big rewards but I would bet he didn't buy that many shares. Couple hundred bucks is great but not a real difference.
Royal Dutch shell cuts its dividend for first time since WW2. That hurt.
Markets are a yo-yo.
I have no interest in getting back in right now.
As soon as the governments stops giving/printing free money and lets us know what the damage is, then I'll look at getting back in.

It's a Internet forum, people can act like experts but I'll bet the bank that every number or gain is exagerated x10.

[Dean2]

Originally Posted by Map Maker

Hindsight is always 20/20.
The big difference is how much your putting back in. Like gilion above bought into cruise ships, that was a big risk and perhaps big rewards but I would bet he didn't buy that many shares. Couple hundred bucks is great but not a real difference.
Royal Dutch shell cuts its dividend for first time since WW2. That hurt.
Markets are a yo-yo.
I have no interest in getting back in right now.
As soon as the governments stops giving/printing free money and lets us know what the damage is, then I'll look at getting back in.

It's a Internet forum, people can act like experts but I'll bet the bank that every number or gain is exagerated x10.

The amount you are putting back in is pretty much irrelevant. Percentage gain applies to any dollar amount. The question is, of your investable cash, how much is in cash, how much is in stocks, bonds and hard assets. The question was, if you are still all in cash, what will be your trigger to know it is time to get back in. There is no right or wrong answer, but there does need to be a solid, rational, well thought out plan to follow. Following your gut will get you hosed most times.

As far as hindsight being 20/20, that is always true and it is why I have consistently recommended legging in. No one can pick the bottom and I don't believe I can either. What you need to have is a list of stocks that are high quality, solid balance sheets, sustainable dividends and the best run in their industry, as I have said many times just on this thread alone.

If your shot about acting like an expert and exaggerating returns is aimed at me, then I find that more than a little offensive. Never took well to being called a liar and investing is an area where I do have a lot of expertise. I have tried to share a bit of what I know, if you don't agree fine, but don't disparage my character.