Financial Markets Meltdown

[Twisted Canuck]

Originally Posted by Buckhead

I am positive I understand how things work. No issues there.
But I am not about to put my family in second place after a boat or quad payment or such. Just the way it is. You do you.

Rubbish. If your family truly comes first you wouldn't be buying toys you can't afford. But nice try.

[Map Maker]

Originally Posted by Trochu

I bet you'd understand pretty quickly if someone bought something from you and didn't pay for it. Most consider it stealing.... then there's the whole honoring your word.

I agree.
Should take responsibility when your signing your name to “buy” that toy.

[elkhunter11]

Originally Posted by Twisted Canuck

Rubbish. If your family truly comes first you wouldn't be buying toys you can't afford. But nice try.

Exactly, if I don't have the money, I don't buy toys. And if I make a deal, I don't just walk away.

[Buckhead]

Then we can agree to disagree.
You have your perceptions and I have mine.
I’m not one of the people on this thread saying how a minor correction in the stock markets is the end of civilization as we know it.

[Twisted Canuck]

Originally Posted by Buckhead

Then we can agree to disagree.
You have your perceptions and I have mine.

I expect your creditor experienced it differently too, Justin.....

[Buckhead]

Originally Posted by Twisted Canuck

I expect your creditor experienced it differently too, Justin.....

I have a different opinion.
Name calling aside.

[Twisted Canuck]

Originally Posted by Buckhead

I have a different opinion.
Name calling aside.

You certainly do. But I apologize, publicly, for calling you Justin as that is pretty bad. Just trying to make the connection that having a different perspective does not absolve one for doing something that is unethical or immoral according to the law, or societal norms. Just my opinion.

But sorry for the slur, sincerely.

[Buckhead]

Originally Posted by Twisted Canuck

You certainly do. But I apologize, publicly, for calling you Justin as that is pretty bad. Just trying to make the connection that having a different perspective does not absolve one for doing something that is unethical or immoral according to the law, or societal norms. Just my opinion.

But sorry for the slur, sincerely.

Things happen in people’s lives beyond their control.
Apparently you would want to see them drawn and quartered for that.
How quaint.

[Trochu]

Originally Posted by Buckhead

Then we can agree to disagree.
You have your perceptions and I have mine.
I’m not one of the people on this thread saying how a minor correction in the stock markets is the end of civilization as we know it.

That you should do what you say you are going to do is not a "perception". I'd love to watch you give your money at the drive-thru, pull to the second window, and them be like "What? Were you under the perception you where going to get food, get lost!" You'd probably lose your mind.

[Twisted Canuck]

Originally Posted by Buckhead

Things happen in people’s lives beyond their control.
Apparently you would want to see them drawn and quartered for that.
How quaint.

Nope, that's an assumption on your part. And things do happen, but it is never beyond your control the contracts you enter into. I come from the school of "pay what you owe to the people you owe". I don't smugly suggest walking away because new toys are made all the time. Call it quaint if you like. I call it having personal integrity and valuing my reputation.

And here I am derailing my own thread, about the 'minor market correction' as you called it. Oh well. Perceptions vary.

[Justfishin73]

This correction is anything but minor

[LJalberta]

Long ways to retirement for me. Continuing to buy equities.

[fishtank]

It’s the perfect storm everything lined up for a domino effect and it starts with China as the manufacturing hub of the world the supply chain disrupted and it will just grow from there . Now put the scenario of a outbreak in North America will the citizens be able to follow strict quarantine protocols... some incident about the diamond princess after the US charter the plane to fly it’s citizen home , in the word of freedom some us tourist refuse to get on the plane and just want to continue their vacation and landed in Japan.(this bunch would be the equivalent of the greta and pipeline protester of the world ... hopefully Darwin catch up with them )

[fishtank]

Originally Posted by fishtank

It’s the perfect storm everything lined up for a domino effect and it starts with China as the manufacturing hub of the world the supply chain disrupted and it will just grow from there . Now put the scenario of a outbreak in North America will the citizens be able to follow strict quarantine protocols... some incident about the diamond princess after the US charter the plane to fly it’s citizen home , in the word of freedom some us tourist refuse to get on the plane and just want to continue their vacation and landed in Japan.(this bunch would be the equivalent of the greta and pipeline protester of the world ... hopefully Darwin catch up with them )

if a strict quarantine issue for panic it might cause and give them a reason to riots , as the racial tension in the us is pretty high right now probably another 1977 and 1992 and Katrina , once something like that break out it will be hard to control.

[elkhunter11]

Originally Posted by LJalberta

Long ways to retirement for me. Continuing to buy equities.

I have been retired for almost five years, and I still buy equities. I haven't held GICs since the interest rates fell in the 90s. The best thing that ever happened for me, was getting out of GICs, and into the markets. Then again, if I was still able to get 10% now, I would be back into GICs.

[Mistagin]

I'm 'retired' - sort of, keep working part-time as I choose too. Currently in a position where I could be employed for a year or two. My wife is at least 2 years away from seriously considering retiring, and even then she may stay employed for a while at a minimum, just for the benefits. We just added considerably to our RRSP's and plan to add to our TFSA's in the next week or two. We're pretty much maxed out on all of them for contributions.

We planned on doing so even before the recent 'corrections' in the market, which I have been expecting for at least a year now. Of course, I certainly enjoyed seeing the value of our investments going up (some like a rocket!) in the past several months, but now is a better time to buy than 2 weeks ago!

We've taken a bit of a hit, down about 4% since the end of January. In my thinking, and planning, the key is to keep a balanced portfolio, and realize there are always ups and downs in the markets (I've been investing for over 40 years). Oh, and in my opinion it is good planning to be a bit more 'conservative' as we get older. I've still got 7 years before I have to roll my RRSP's into an RRIF, and my wife has 10 to go so there is plenty of time for recovery and profit to be made yet . If I only had a year or so to go then I'd move funds into 'safe' investments and cash.

[lmtada]

Originally Posted by Twisted Canuck

They could always go negative rates, been that way in Europe for a while. Germany comes to mind.

Exactly why American Markets are overvalued. Money fleeing Germany 🇩🇪 to America.

[Scott h]

Originally Posted by Buckhead

Then we can agree to disagree.
You have your perceptions and I have mine.
I’m not one of the people on this thread saying how a minor correction in the stock markets is the end of civilization as we know it.

Interesting perspective that this will be a minor correction. Sounds like you've got a bright future on the Trump, Pence team.....you should send them your CV

[Scott h]

Originally Posted by elkhunter11

I have been retired for almost five years, and I still buy equities. I haven't held GICs since the interest rates fell in the 90s. The best thing that ever happened for me, was getting out of GICs, and into the markets. Then again, if I was still able to get 10% now, I would be back into GICs.

Oh man I'd kill for a GIC from '82 with a 16% rate !!!!! Unfortunately at the same time you could buy homes in Calgary for pennies on the dollar as people walked away from them. It was a great time to have cash !!!!!

[raab]

Originally Posted by Scott h

Interesting perspective that this will be a minor correction. Sounds like you've got a bright future on the Trump, Pence team.....you should send them your CV

And now your getting to the main point of worry in the markets. With Sanders looking like the Democratic party's nominee. People are starting to get worried. Coronavirus is only half the reason people are retreating out of the markets. The main worry is a Sanders win in the US. He will absolutely cripple the US economy, and for that matter ours.

[Twisted Canuck]

Originally Posted by raab

And now your getting to the main point of worry in the markets. With Sanders looking like the Democratic party's nominee. People are starting to get worried. Coronavirus is only half the reason people are retreating out of the markets. The main worry is a Sanders win in the US. He will absolutely cripple the US economy, and for that matter ours.

As much as I can't possibly see Angry Bernie ever win the Presidency of the USA....they said the same of Trump. But I just can't see it. But if it does happen, look out.

But we don't need Bernie to cripple our economy, 5 years of JT and the gang have done a remarkable job. Look at the numbers and projections. Investment decline, GDP numbers, and don't believe all the 'new job's that were created. Canada is in serious decline, and it is accelerating. Now Libs are looking at raising the capital gains tax, because the 'rich' are always fair game to pay for Liberal spending. Jesus wept.

The truly sad, even disgusting part, is the quality and character of leadership on either side of the aisle that voters have to chose between.

2020. Is going to be an interesting year. Probably not a really fun one for many.

[1stLand]

Originally Posted by Twisted Canuck

As much as I can't possibly see Angry Bernie ever win the Presidency of the USA....they said the same of Trump. But I just can't see it. But if it does happen, look out.

But we don't need Bernie to cripple our economy, 5 years of JT and the gang have done a remarkable job. Look at the numbers and projections. Investment decline, GDP numbers, and don't believe all the 'new job's that were created. Canada is in serious decline, and it is accelerating. Now Libs are looking at raising the capital gains tax, because the 'rich' are always fair game to pay for Liberal spending. Jesus wept.

The truly sad, even disgusting part, is the quality and character of leadership on either side of the aisle that voters have to chose between.

2020. Is going to be an interesting year. Probably not a really fun one for many.

If Bernie gets elected, he will be the first Jewish President in history.Also, I dont believe a bald man has ever been elected President.

[elkhunter11]

Originally Posted by Scott h

Oh man I'd kill for a GIC from '82 with a 16% rate !!!!! Unfortunately at the same time you could buy homes in Calgary for pennies on the dollar as people walked away from them. It was a great time to have cash !!!!!

My last GIC was 10% for five years, when it came due, they offered me less than 2%, that drove me to invest in the markets.

[bdub]

Now that we’re into correction territory what does a guy do. If your invested in index etf's tracking the market you’re down the market roughly. If you are into individual stocks you are lost likely down some multiple of that, your portfolio most likely has a beta between 1.2-2 or more depending, so you are likely seeing declines of 15-20% plus already. The worst mistakes will be made by the investors that hang on until they can’t stand the pain and then bail at the bottom. Then they compound that mistake and take too long to get back in or never return to the market.

If you are a young investor and have no cash sitting, I wouldn’t do anything. Maybe try and scrimp up a few extra bucks, delay that new truck and try and add on the panic. If you are middle age or later and fully invested in stocks its tough. Seeing a huge chunk of your savings get wiped out on paper is stressful. Just remember historically this will pass. May take a few years or may take a few weeks, but it will eventually come back if you are holding quality.

If you were lucky enough to be practicing some sort of risk management and have some cash sitting this is the golden opportunity, and the reason why you have been managing your risk. Now the big decision is when to get in? If you think you are an investing genius and can time the exact bottom, perfect. If your sensible you will realize that it is going to be next to impossible. Average in over time. Make some rules. Put x amount to work at level y of the market, put x1 amount to work at y2 level and so on.

Saying that, you have to realize that the future rates of return on the cash to be deployed is directly linked to the decisions on levels of x and y. The main problem is y is unpredictable. There are certain factors to watch that can hopefully give us a rough idea though. The number one thing is obviously the statistics on the virus and how the market is interpreting them. Next is bond yields/what the FED does. And then add in other numerous numbers of other factors.

I keep a close eye on the VIX when panics hit markets. The VIX, a measure of how volatile the market is, will give us some indication of the market’s interpretation of all these factors. Right now, the VIX is telling us the market could potentially swing several percent up or down here. On Friday we were kissing 50, a very high level historically.

To give some past reference and how to think about this correction I looked at a couple periods. First the mini crash in 2018 where we seen a run of the mill 20% correction. Although painful this was short lived. The vix hit its peak around 36 ish on Dec 24/18, the bottom of the correction. The 2008 period was much different, the vix was high for an extended time, hitting 80+ a couple times through Nov/Oct 2008. But the market didn’t hit its bottom until early March 2009 where the vix was hovering at the 50 level. By September 2009 the vix finally started to hit levels around 30 and the market was already up close to 40% off its bottom. We were well into the next bull market.

The vix is telling me that this event is much more serious than the 2018 correction, more like the 2008 crash but we will only know in hindsight.

Don't take any of this as any sort of serious advice. Best of luck.

[Dean2]

Originally Posted by bdub

Now that we’re into correction territory what does a guy do. If your invested in index etf's tracking the market you’re down the market roughly. If you are into individual stocks you are lost likely down some multiple of that, your portfolio most likely has a beta between 1.2-2 or more depending, so you are likely seeing declines of 15-20% plus already. The worst mistakes will be made by the investors that hang on until they can’t stand the pain and then bail at the bottom. Then they compound that mistake and take too long to get back in or never return to the market.

If you are a young investor and have no cash sitting, I wouldn’t do anything. Maybe try and scrimp up a few extra bucks, delay that new truck and try and add on the panic. If you are middle age or later and fully invested in stocks its tough. Seeing a huge chunk of your savings get wiped out on paper is stressful. Just remember historically this will pass. May take a few years or may take a few weeks, but it will eventually come back if you are holding quality.

If you were lucky enough to be practicing some sort of risk management and have some cash sitting this is the golden opportunity, and the reason why you have been managing your risk. Now the big decision is when to get in? If you think you are an investing genius and can time the exact bottom, perfect. If your sensible you will realize that it is going to be next to impossible. Average in over time. Make some rules. Put x amount to work at level y of the market, put x1 amount to work at y2 level and so on.

Saying that, you have to realize that the future rates of return on the cash to be deployed is directly linked to the decisions on levels of x and y. The main problem is y is unpredictable. There are certain factors to watch that can hopefully give us a rough idea though. The number one thing is obviously the statistics on the virus and how the market is interpreting them. Next is bond yields/what the FED does. And then add in other numerous numbers of other factors.

I keep a close eye on the VIX when panics hit markets. The VIX, a measure of how volatile the market is, will give us some indication of the market’s interpretation of all these factors. Right now, the VIX is telling us the market could potentially swing several percent up or down here. On Friday we were kissing 50, a very high level historically.

To give some past reference and how to think about this correction I looked at a couple periods. First the mini crash in 2018 where we seen a run of the mill 20% correction. Although painful this was short lived. The vix hit its peak around 36 ish on Dec 24/18, the bottom of the correction. The 2008 period was much different, the vix was high for an extended time, hitting 80+ a couple times through Nov/Oct 2008. But the market didn’t hit its bottom until early March 2009 where the vix was hovering at the 50 level. By September 2009 the vix finally started to hit levels around 30 and the market was already up close to 40% off its bottom. We were well into the next bull market.

The vix is telling me that this event is much more serious than the 2018 correction, more like the 2008 crash but we will only know in hindsight.

Don't take any of this as any sort of serious advice. Best of luck.

You may say don't take this as any kind of serious advice, but it is actually pretty good. My only point would be, if the Beta on your overall portfolio of holdings is over 1.3 let alone anywhere near 2, then you have far too many volatile stocks in your portfolio. Most of the Big Canadian Banks have a Beta of 1 or less, as does Enbridge at 1, and TransCanada Pipe is a .76 Beta etc. You need some higher Beta to take advantage of the markets growing but it needs to be balanced with lower Beta stocks to protect on the down side or you might just as well buy the index ETF.

[bdub]

Originally Posted by Dean2

You may say don't take this as any kind of serious advice, but it is actually pretty good. My only point would be, if the Beta on your overall portfolio of holdings is over 1.3 let alone anywhere near 2, then you have far too many volatile stocks in your portfolio. Most of the Big Canadian Banks have a Beta of 1 or less, as does Enbridge at 1, and TransCanada Pipe is a .76 Beta etc. You need some higher Beta to take advantage of the markets growing but it needs to be balanced with lower Beta stocks to protect on the down side or you might just as well buy the index ETF.

Thanks Dean.
Just a word on Beta. The level of Beta on certain categories of stocks will change drastically during a crisis. Many stocks will see large increases in the level of beta and as a result larger drawdowns than the market. During the GFC the beta on financial stocks increased drastically for obvious reasons. Individual investors typically are slow to react to these changes in beta as the market and individual stocks react to the crisis. Historical beta doesn’t predict future beta when crap hits the fan unfortunately.

[Buckhead]

Originally Posted by Trochu

That you should do what you say you are going to do is not a "perception". I'd love to watch you give your money at the drive-thru, pull to the second window, and them be like "What? Were you under the perception you where going to get food, get lost!" You'd probably lose your mind.

I wouldn’t be at a drive-thru. I don’t eat garbage, so that would never happen. I plan and prepare all my own meals. I’m not a Millennial with limited life experience and an attitude of “Do as I say not as I do”.

[Dean2]

Originally Posted by bdub

Thanks Dean.
Just a word on Beta. The level of Beta on certain categories of stocks will change drastically during a crisis. Many stocks will see large increases in the level of beta and as a result larger drawdowns than the market. During the GFC the beta on financial stocks increased drastically for obvious reasons. Individual investors typically are slow to react to these changes in beta as the market and individual stocks react to the crisis. Historical beta doesn’t predict future beta when crap hits the fan unfortunately.

NO historical measure, growth, Beta, Alpha etc. predicts future behaviour. Yes there are events that can make a low Beta stock into a high Beta stock, and yes a real low Beta may just be an indication that the stock hasn't done anything for a long time. All that said, if you go into a major correction with a 2.0 Beta portfolio you are going to be one really unhappy camper because the Beta isn't likely to get better through the drop.

Guy can't look at just one or even a few variables to decide what a prudent portfolio construction is. If it was simple anyone could do it, and from long experience I can guarantee there are a lot less people good at it than bad at it. I can also guarantee that many of the so called professionals are almost as bad as the amateurs. Finding a really good advisor is like finding a B&C 200 point Typical Whitetail.

[Buckhead]

Finally, we are seeing some markets with a 10-12% correction which is where real correction territory begins. Gold prices are off a bit. People moving their money to cash, perhaps?
Now that the markets are at this level we will see what happens next and how the central banks react. Very interesting times we are in.

[Buckhead]

Originally Posted by Scott h

Interesting perspective that this will be a minor correction. Sounds like you've got a bright future on the Trump, Pence team.....you should send them your CV

If the compensation is in line with my expectations I would be more than happy to consider that option.
I try and base my opinions on facts - not fear mongering.