Financial Markets Meltdown

[farmdad]

If you’re not needing your money any time soon, just hang on there. Don’t sell at the bottom. If anything, it’s time to buy.

[Map Maker]

Originally Posted by pikeman06

Bahaha...you know it bud. Low ballers dream come true. Making room in the garage as we speak.

What’s the first to go?
Harleys and pontoon boats?

[fishtank]

Probably the RV …..then the toy haulers.

[Jim Blake]

Oil off 5 bucks this morning. Could be another interesting day!!

[pikeman06]

Originally Posted by Map Maker

What’s the first to go?
Harleys and pontoon boats?

I'm thinkin jet boats and mountain sleds are gonna be a good buy. Definitely interesting times ahead for the unfortunate souls financed to the hilt.

[MountainTi]

Originally Posted by Jim

The faster they raise interest rates the faster I can start low balling people on Kijiji who are trying to sell their toys to pay the variable mortgage and Helocs.

Oil industry (and of course the trickle down) is booming right now. Shortage of workers, not work. Might not be as many people pawning toys as you're hoping for.

[Jim Blake]

Bank of Canada raises rate by a full one percent.

[slough shark]

Originally Posted by Jim Blake

Bank of Canada raises rate by a full one percent.

While this doesn’t impact me at all those with variable rate mortgages are going to take a big hit, those people in Vancouver or Toronto with million dollar mortgages just saw their monthly payment go up $5-600 a month. I know a change that big in monthly financial obligations would impact me, especially since previous months saw costs of mortgages go up as well and likely going to go up again this fall on top of this ridiculous inflation we have, some folks are going to be hurting soon if not already.

[Sundancefisher]

Yikes. A one percent bump could hurt a lot of people.

[Map Maker]

I think “hurt” is a bit of a stretch.
It means only 1 trip to Mexico instead of two.
We all have been living high on the hog for the last 10 years.
I think that was the point of low interest rates so people spend first then worry about paying after.

I still would want to see 7% interest so paying “cash” for something would get you a discount.

[Jim Blake]

Bump. Royal Bank sure taking a kicking today. TD is at a 52 week low. Looks like most every sector is taking a major hit.

Crazy times for sure. With the BOC more than mildly indicating raising rates past 3.25% things are going to get uglier.

I'm not at the buying point yet but could be wrong.

[fishtank]

Bank adjust prime rate to 4.7 … starting to feel it .

[59whiskers]

Utility stocks doing okay.

[KGB]

Oil stocks are getting hit hard again…. Some down almost 10%….

[ehrgeiz]

Man, what a mess from years of terrible decisions by western Governments in pursuit of virtue and vanity while ignoring the real world problems. The mess was compounded by the absolute failure of a CV19 response (literally would have been better off doing nothing at all).

2 poison pills, interest rate increases, hyper inflation or some mixture of both. Can this all really just be hopeless incompetence? In July 2020 the Governor of the Bank of Canada was on TV assuring consumers rates were going to be held low for a long time and encouraged debt spending.

I really wonder how these dramatic rate increases can be tolerated. If you start seeing widespread defaults and they start talking about UBI, helicopter money and debt forgiveness I guess the conspiracy theorists will have been right all along.

[Jim Blake]

Originally Posted by 59whiskers

Utility stocks doing okay.

Yes, they are holding their own. Banks are really getting hammered. RBC off over 6 bucks to a new 52 week low.

Of course as stated many times in previous posts, trying to time the markets is a futile endeavor but with known hikes in BOC interest rates coming, a good possibility of a recession, and the stupid moves of our Leadership a given, I think we aren't even being close to the bottom.

Oil is going to be very volatile both up and down for some time to come.

That's my bet for now anyway...thoughts?

[Drewski Canuck]

Originally Posted by Sundancefisher

Yikes. A one percent bump could hurt a lot of people.

For the majority of citizens, they have been living one paycheck from bankruptcy for a very long time.

For the majority of citizens, the increase of even 1 % will be fatal on residential mortgages as disposable income has been hammered by increased taxation and fees, increased utility costs, increased food costs, etc.

For the few (and statistically it is a surprisingly few who are actually retail investors in the marketplace) you have the choice to bail or to sit tight.

The big sovereign funds and pension funds who really dictate the market are re grouping right now. The last bad bump was with Covid in early 2020. That did not last either.

In the mean time, wages will freeze and the real rate of inflation will bring everyone down in spending power.

But from the point of view of the Globalists, they want a weak population.

Drewski

[Map Maker]

Originally Posted by Drewski Canuck

For the majority of citizens, they have been living one paycheck from bankruptcy for a very long time.

For the majority of citizens, the increase of even 1 % will be fatal on residential mortgages as disposable income has been hammered by increased taxation and fees, increased utility costs, increased food costs, etc.

For the few (and statistically it is a surprisingly few who are actually retail investors in the marketplace) you have the choice to bail or to sit tight.

The big sovereign funds and pension funds who really dictate the market are re grouping right now. The last bad bump was with Covid in early 2020. That did not last either.

In the mean time, wages will freeze and the real rate of inflation will bring everyone down in spending power.

But from the point of view of the Globalists, they want a weak population.

Drewski

Interesting view but I think completely false.
You think the majority of citizens are living one paycheck from bankruptcy?
I would bet less than 1% are that way.

Banks won’t lend unless they are sure people won’t go bankrupt.
If they default on an RV, banks take the RV and 50% of what they paid so far. Ie Banks win.

I assume you want this boom cycle to continue so everyone is strong?
But all it is, is a fake reality. Money really is just a piece of paper.

The reason why I want interest rates to rise is so people get a swift dose of reality.
People with mortgages think they own their houses. They do not. The bank owns them until they are paid off in full. Banks are actually owning almost everything.
Banks are raising interest rates and guess what happens? They either get more interest or people default and banks take over their house. Ie Banks win.

My view anyways.

[trailraat]

Originally Posted by Map Maker

Interesting view but I think completely false.
You think the majority of citizens are living one paycheck from bankruptcy?
I would bet less than 1% are that way.

Banks won’t lend unless they are sure people won’t go bankrupt.
If they default on an RV, banks take the RV and 50% of what they paid so far. Ie Banks win.

I assume you want this boom cycle to continue so everyone is strong?
But all it is, is a fake reality. Money really is just a piece of paper.

The reason why I want interest rates to rise is so people get a swift dose of reality.
People with mortgages think they own their houses. They do not. The bank owns them until they are paid off in full. Banks are actually owning almost everything.
Banks are raising interest rates and guess what happens? They either get more interest or people default and banks take over their house. Ie Banks win.

My view anyways.

Those people who the banks lent to weren't on the edge of bankruptcy at 2% interest, but they are at 5% or 6%. Many people are mortgaged to the hilt and have car payments, rv payments etc. small changes interest rates will seriously challenge them.

The problem with the bank taking peoples houses is the value declines and more and more people are left with assets with less value than they paid which means it makes more sense to go bankrupt than keep the asset, further triggering a decline in asset value. This is what happened in the US in 08 and now it's Canada's turn.

[Dean2]

I know that even quality portfolios are taking a beating in this market. I always try to remain calm and also remember, I am still up on average 12% from this time 12 months ago. It is way more fun watching the portfolio go up than down, but our dividend re-investment plan is working great for us in this market. The lower stock prices mean we are buying more shares with our quarterly or monthly dividends. Remember, the dividends have not gone down so they continue to be a great source of averaging down, or income, despite what the share prices are doing. We have had two solid years of spectacular price appreciation, corrections are going to happen regularly, don't let a short term swing throw you off your long term plan.

[CBintheNorth]

Originally Posted by Map Maker

Interesting view but I think completely false.
You think the majority of citizens are living one paycheck from bankruptcy?
I would bet less than 1% are that way.

Banks won’t lend unless they are sure people won’t go bankrupt.
If they default on an RV, banks take the RV and 50% of what they paid so far. Ie Banks win.

I assume you want this boom cycle to continue so everyone is strong?
But all it is, is a fake reality. Money really is just a piece of paper.

The reason why I want interest rates to rise is so people get a swift dose of reality.
People with mortgages think they own their houses. They do not. The bank owns them until they are paid off in full. Banks are actually owning almost everything.
Banks are raising interest rates and guess what happens? They either get more interest or people default and banks take over their house. Ie Banks win.

My view anyways.

You think you own your property after you're done paying for it?
Quit paying the property tax and then let me know who actually owns your house.
Sadly, all we own is the building. We never really own the land.
Actually, I'm not really sure you own the building either, seeing as how you have to receive a permit to be able to tear down.
I can't think of any other asset like that.

[Map Maker]

Originally Posted by CBintheNorth

You think you own your property after you're done paying for it?
Quit paying the property tax and then let me know who actually owns your house.
Sadly, all we own is the building. We never really own the land.
Actually, I'm not really sure you own the building either, seeing as how you have to receive a permit to be able to tear down.
I can't think of any other asset like that.

Taxes and death are the only certainties in life. Taxes and mortgages are apples and oranges.
But on that note, you are correct, we don’t own anything because the crown owns all our land and can annex if the want.
USA doesn’t have a crown, that is why you see so many unoccupied lots in USA cuz if someone dies with no inheritance, the land stays in their name. Can’t tax a dead guy.
In Canada, that land would go back to the crown.

[Jim Blake]

Bought a bunch of RBC on Friday. Even if it tumbles a bit more with the headwinds ahead I feel it is a great buy. Keeping a bunch of powder dry for the next round.

[Drewski Canuck]

Originally Posted by Map Maker

Interesting view but I think completely false.
You think the majority of citizens are living one paycheck from bankruptcy?
I would bet less than 1% are that way.

Banks won’t lend unless they are sure people won’t go bankrupt.
If they default on an RV, banks take the RV and 50% of what they paid so far. Ie Banks win.

I assume you want this boom cycle to continue so everyone is strong?
But all it is, is a fake reality. Money really is just a piece of paper.

The reason why I want interest rates to rise is so people get a swift dose of reality.
People with mortgages think they own their houses. They do not. The bank owns them until they are paid off in full. Banks are actually owning almost everything.
Banks are raising interest rates and guess what happens? They either get more interest or people default and banks take over their house. Ie Banks win.

My view anyways.

With greatest respect, you are mislead on your assessment of WHO owns the house on default. For the majority of the market, CMHC, or National Housing Act Security, is in play. That means when the house is foreclosed on and is sold, if there is a loss, the Bank turns to the Canadian Mortgage and Housing Corporation, who then pays the loss. The Borrower is then personally liable (an exception to normal "mortgage law") and the Crown Corporation sues you. The Government owns the house.

The Bank rarely loses on Mortgage Defaults because of CMHC security. CMHC is usually 3 % of the mortgage value with possible 95 % financed on the purchase. At $400 K mortgage, that is $12,000 paid to CMHC up front, to insure the Banks. This is paid to the Crown Corporation.

Banks are more interested in High Interest products like Credit Cards. Banks lend with glee on 18 & 24 % Credit Cards. This is the risk of loss that justifies the big interest returns. High interest vehicle loans fall into the same category. The near bankrupts are the best customers for the lender.

As for wanting the boom cycle to continue, it is your Government who wants it to continue with low interest rates. The reason is your GOVERNMENT is one of the biggest Debtors in Society. Many Countries are scheduled to default on their "interest only" payment on National Debt. That is because the tax base is not enough to pay the interest, let alone Government liabilities that are outstanding (think Pensions for example).

Yes, it is a house of cards. I did not create it, and I cannot control it. Neither can any of you. But your wish that interest rates rise will see a rather severe punishment for an International Debt Crisis. The IMF and the EU has bailed out the PIGS (Portugal, Italy, Greece & Spain) and none of those Countries have paid back their national debt to leave IMF / EU support.

What happens when the IMF cannot bail out Ghana, Kenya, South Africa, Ethiopia, Argentina, Sri Lanka, Lebanon, Russia, Suriname, Zambia, El Salvador, Egypt, Tunisia, Pakistan, and Ukraine?

It really won't matter what you and I want to happen. Foreign Bond Markets are driving up Interest rates to attract Bond Investors, forcing Domestic Bond sales to increase to try and keep Bond Investors. Interest rates will rise, Countries will fail, the IMF cannot possibly backstop every Country, and then there will be a financial collapse world wide.

Drewski

[Map Maker]

👍

[nelsonob1]

Less than 20% or mortgages are insured in Canada and only a small fraction of the market defaults on secured debt. Real estate prices are falling, not the Sky. Things will begin to calm down within the next year and then the cycle will repeat again.

[Dean2]

Originally Posted by nelsonob1

less than 20% or mortgages are insured in canada and only a small fraction of the market defaults on secured debt. Real estate prices are falling, not the sky. Things will begin to calm down within the next year and then the cycle will repeat again.

👍

[bdub]

From an article in Bloomberg this morning. This is a good sign.

BofA Survey Shows Full Investor Capitulation Amid Pessimism


"Investors slashed their exposure to risk assets to levels not seen even during the global financial crisis in a sign of full capitulation amid a “dire” economic outlook, according to Bank of America Corp.’s monthly fund manager survey.

Global growth and profit expectations sank to an all-time low, while recession expectations were at their highest since the pandemic-fueled slowdown in May 2020, strategists led by Michael Hartnett wrote in the note. Investor allocation to stocks plunged to levels last seen in October 2008 while exposure to cash surged to the highest since 2001, according to the survey. A net 58% of fund managers said they’re taking lower than normal risks, a record that surpassed the survey’s global financial crisis levels."

[Dean2]

Originally Posted by Dean2

I know that even quality portfolios are taking a beating in this market. I always try to remain calm and also remember, I am still up on average 12% from this time 12 months ago. It is way more fun watching the portfolio go up than down, but our dividend re-investment plan is working great for us in this market. The lower stock prices mean we are buying more shares with our quarterly or monthly dividends. Remember, the dividends have not gone down so they continue to be a great source of averaging down, or income, despite what the share prices are doing. We have had two solid years of spectacular price appreciation, corrections are going to happen regularly, don't let a short term swing throw you off your long term plan.

So like you already know, the markets are all over the place. I posted this Sunday, in the last two days alone the portfolio has gone up 4.8% as of 9:30 July 19. That is some pretty radical swinging for a portfolio made up of conservative, blue chip, dividend paying stocks. Thursday/Friday last week, there were some exceptional buying opportunities on a range of quality stocks. The dividends that got reinvested on the 13th and 15th did real well.

[bdub]

Originally Posted by Dean2

So like you already know, the markets are all over the place. I posted this Sunday, in the last two days alone the portfolio has gone up 4.8% as of 9:30 July 19. That is some pretty radical swinging for a portfolio made up of conservative, blue chip, dividend paying stocks. Thursday/Friday last week, there were some exceptional buying opportunities on a range of quality stocks. The dividends that got reinvested on the 13th and 15th did real well.

Indeed it sure has been volatile. Depending which market you are looking at we have had 3 or 4 bear market rallies in this 7-8 month long drawdown. Hopefully we have reached selling exhaustion. The market will typically bottom before or around the time we see a recession declared, if we are in fact heading to or are already in a recession. No one knows for sure but the BofA sentiment survey gives an indication that the selling by the big guys may be over, at least for the short term anyway and a nice rally is underway.