Financial Markets Meltdown

[bdub]

Originally Posted by Dean2

The people that believed central bank interest would level out at 2.5-3.0% are the same ones that fell for the "Transitory" inflation nonsense. Either the Central Banks are outright lying or they are completely incompetent. Neither is good for us as consumers and tax payers. Anyone still in a variable rate mortgage is going to be in BIG trouble over the next 24 months because we are going to have high interest rates and still high inflation.

Bank Results - TD good, BNS very good and actually best of what has posted so far. BNS shares are getting beat on because they missed "Expectations" so at 73 and 74 to me they are good value and they are paying a strong dividend. I have added some BNS and I don't usually hold a lot of this one. RBC average to not great - they have a heavy capital markets business and that did not do well this past quarter. Canadian Western - suck and have for the past 4 quarters. CWB used to be a pretty well run Bank, it isn't any more.

I agree, rates are still heading higher for another couple meetings for sure I bet. Barring some type of financial crisis or other black swan event.

I am still way underweight financials, 3% for myself. Tempting but I haven't added any just yet. They are on the radar though like Tech.

[mac1983]

Originally Posted by Dean2

The people that believed central bank interest would level out at 2.5-3.0% are the same ones that fell for the "Transitory" inflation nonsense. Either the Central Banks are outright lying or they are completely incompetent. Neither is good for us as consumers and tax payers. Anyone still in a variable rate mortgage is going to be in BIG trouble over the next 24 months because we are going to have high interest rates and still high inflation.

Bank Results - TD good, BNS very good and actually best of what has posted so far. BNS shares are getting beat on because they missed "Expectations" so at 73 and 74 to me they are good value and they are paying a strong dividend. I have added some BNS and I don't usually hold a lot of this one. RBC average to not great - they have a heavy capital markets business and that did not do well this past quarter. Canadian Western - suck and have for the past 4 quarters. CWB used to be a pretty well run Bank, it isn't any more.

Curious on BNS and where they are in Canadian banking system.

[Dean2]

Originally Posted by mac1983

Curious on BNS and where they are in Canadian banking system.

Part of investing successfully is learning to research the companies. Google is a great start, there are hundreds of articles published about BNS, the Canadian banking sector etc. That is a great place to start your research and you will refine your knowledge as you learn more about BNS and the rest of the big 6. Best of luck and post a synopsis of what your learn and come to think about BNS.

[mac1983]

Originally Posted by Dean2

Part of investing successfully is learning to research the companies. Google is a great start, there are hundreds of articles published about BNS, the Canadian banking sector etc. That is a great place to start your research and you will refine your knowledge as you learn more about BNS and the rest of the big 6. Best of luck and post a synopsis of what your learn and come to think about BNS.

MY area of expertise is the oil and gas industry, and I am quite comfortable in that world, the Banking industry not so much. You are absolutely correct that I do my own research and I will do some more reading on this topic. I may come back with some points on BNS time will tell, I did make a small purchase of 20 shares today just before closing to give myself some incentive.

I do realize if you wanted to give your take on stocks all day you would be a very busy man. And I appreciate what you and bdub are willing to share a lot.

And with that I will leave you be...


.

[75ft Arborist]

Today stung a little

[eric2381]

If one day feels like it “stung”, you need to learn to invest in companies that you want to be an owner of.


If you had a new pick up truck that was worth $50,000, but I offered you $500 cash, take it or leave it. Would that make you think that your pick up truck was only worth $500? Of course not. It’s just me low balling you. You can refuse it and wait for someone to pay you what it’s worth or maybe even more. Don’t let some low ball jerk bother you.

[fishtank]

Originally Posted by eric2381

If one day feels like it “stung”, you need to learn to invest in companies that you want to be an owner of.


If you had a new pick up truck that was worth $50,000, but I offered you $500 cash, take it or leave it. Would that make you think that your pick up truck was only worth $500? Of course not. It’s just me low balling you. You can refuse it and wait for someone to pay you what it’s worth or maybe even more. Don’t let some low ball jerk bother you.

Exactly, if you know the company is well run. When the market drop, it’s time to back the truck up and load up . Average down

[roper1]

Originally Posted by eric2381

If one day feels like it “stung”, you need to learn to invest in companies that you want to be an owner of.


If you had a new pick up truck that was worth $50,000, but I offered you $500 cash, take it or leave it. Would that make you think that your pick up truck was only worth $500? Of course not. It’s just me low balling you. You can refuse it and wait for someone to pay you what it’s worth or maybe even more. Don’t let some low ball jerk bother you.

Yessir, and unlike the pickup, quality companies will actually appreciate in value, sometimes giving you a little seed back in the form of low-tax dividends. What's not to like ?

Having said that, today stung for me also.

[nelsonob1]

Current rates are no high. In the historical sense they are quite modest, but given the rate of Inflation, they are extremely low. The central bank is banking that these large hikes will create caution and change behavior, but at current interest levels they are not pulling enough liquidity out of the market to make a direct economic impact. Rates will increase imo for at least another year and stay at those levels for longer, even if recession takes hold . BUT there is no reason to panic. It's much better to have higher costs of borrowing than higher cost of living.

Originally Posted by bdub

I agree, rates are still heading higher for another couple meetings for sure I bet. Barring some type of financial crisis or other black swan event.

[Fisherdan]

This has been a great thread, which I really do appreciate. One thing that it has shown me is that I really don’t know as much as I thought I did! Turns out that I haven’t even scratched the surface. A few thoughts and comments…

It’s clear that there are a few guys on this site who have experience and really know what they are doing… they may be or have been employed in the investing world.

I’m definitely not one of those! Between work, family, and everything else going on, there is just not as much time as I’d like to devote to investing. I’ve always passively invested in equity or index funds (TDB972 and TDB900) because of this. I also had Suncor shares. I guess that it served me okay. Just not better than that. So I do appreciate the insight that people have here.

Several months ago, I decided to sell my Tdb900 Canadian index fund (it bothered me that this fund had positions in Shopify and other companies that I had no interest in) as well as Suncor, and put it towards TD, RBC, XEG(Canadian energy IShares) and FRU. Did well, then bad, then badder, now coming back up… and we’ll see from here!

Also swapped some XEG for CNQ last week. That’s been pretty good so far.

That being said, if I had left it in TDB900, I’d be further ahead as of today. Still have, and don’t intend to sell TDB972.

What works for one person, might not work well for the next. Everyone reacts differently to risk. Some people lose sleep, and get consumed. Others simply don’t.

A completely irrational risk to one person, might seem tangible to the next.

People can get sucked down a rabbit hole of more and more bad information… they may have a tendency for long wascilly wabbit holes that seem really good, but go the wrong way.

Some people are just plain greedy. Too greedy. And most certainly, online trading fuels countless gambling addictions.

It’s not talked about, which surprises me, but I’m convinced that a lot of older people, who begin to lose their mental faculties, also lose their savings with self directed trading.

I believe that patience and risk tolerance are skills that need to be learned and improved upon.

Mistakes need to be examined and used to learn from.
Example: trades made on the sh!tt@r, tend to be, well.. you know…

You need to accurately and honestly know yourself.

[fishtank]

As mention many times the rate will continue to trend up for the next few quarters, inflation will work it way out feds think the can control it all they are doing just manipulating the numbers .

[bdub]

Fisherdan

I was curious what the funds you are holding consisted of so I looked them up. I was curious what you are paying for fees.

The TDB900 is basically a replication of the TSX index. Its MER is .28%, which is pretty reasonable, not the cheapest out there for the same thing, but not bad. The MER on TDB972 is 2.03%. This is one of the areas that can make a real difference in your long run returns over time.

Lets say you invested $50000 in two different accounts for 20 years at an average annual return of 8% before fees. One accounts cost you 2.03% per year. The other account costs you .10% per year. After 20 years the more expensive fund will leave you with $159,449. The fund charging .10% will leave you with $228,769.

You can play with different fees with this calculator.

https://www.investright.org/informed...ee-calculator/

Just to pick on the TD972 fund for a bit more. Looking at the fund weightings it is composed of 46.7% financials, 20.4% energy, 9.5% industrials. That is a heavy weighting in financials unless you have a tactical reason for being that heavy in the sector. That funds returns are going to be heavily influenced by returns in the financials. Despite the fund holding 75 holdings, I would not consider it a well diversified portfolio on its own. Just something to keep in mind and just my my personal opinion.

https://www.td.com/ca/en/asset-manag...ds/TDB972E.pdf

[KGB]

Originally Posted by Dean2

I am generally a pretty patient guy but you have exhausted that with this ongoing dead cat bounce bullshiet. If you don't get it by now you never are going to. Look at the friggin 10 year chart. This applies to TD, RBC and BNS, and to a large degree BMO and even CIBC. If you bought any at the low between Jan and Dec of any year, you made great money, if you paid the highest price between Jan and Dec of that same year, you have still made good money. RY was $38 in 2012 it is now $125 and you collected at least $30 in dividends over those 10 years. How hard is that to actually figure out. Yes there are stocks like Nortel and Blackberry, Shopify and a whole bunch more that do dead cat, but those aren't what most people should be buying anyhow. Try not to confuse volatile crap stock with the good stuff. You don't get rich in one year.

I was thinking of replying in the same rude manner first. Meh, ain’t worth it.

[Buckhead]

I don’t see higher interest rates really doing anything to dampen inflation in the next couple of years. I just don’t perceive the issue as one of rampant borrowing at lower interest rates.
Canadians have stashed away $280 billion during the Covid lockdowns and now want to spend but there is a shortage of things to spend on. Until the supply chain issues are resolved having the BOC raise interest rates isn’t going to do anything IMO.

[Dean2]

Originally Posted by KGB

I was thinking of replying in the same rude manner first. Meh, ain’t worth it.

I did not intend to be rude but when I re-read what I wrote it does come off as rude for sure. Sorry about that. Was a little frustrated about re-explaining the same things over and over. Should have just left it be, or at least worded it better.

[Fisherdan]

Originally Posted by bdub

Fisherdan

I was curious what the funds you are holding consisted of so I looked them up. I was curious what you are paying for fees.

The TDB900 is basically a replication of the TSX index. Its MER is .28%, which is pretty reasonable, not the cheapest out there for the same thing, but not bad. The MER on TDB972 is 2.03%. This is one of the areas that can make a real difference in your long run returns over time.

Lets say you invested $50000 in two different accounts for 20 years at an average annual return of 8% before fees. One accounts cost you 2.03% per year. The other account costs you .10% per year. After 20 years the more expensive fund will leave you with $159,449. The fund charging .10% will leave you with $228,769.

You can play with different fees with this calculator.

https://www.investright.org/informed...ee-calculator/

Just to pick on the TD972 fund for a bit more. Looking at the fund weightings it is composed of 46.7% financials, 20.4% energy, 9.5% industrials. That is a heavy weighting in financials unless you have a tactical reason for being that heavy in the sector. That funds returns are going to be heavily influenced by returns in the financials. Despite the fund holding 75 holdings, I would not consider it a well diversified portfolio on its own. Just something to keep in mind and just my my personal opinion.

https://www.td.com/ca/en/asset-manag...ds/TDB972E.pdf

Hi bdub. Please pick away! Appreciate the help.

I’ve had TDB900 for years, and generally I’ve been happy with it. You are right it has a low MER fee. I decided to drop it recently because it’s number one holding is Shopify at 4% of the fund. YTD, the fund is down about 5%, while TDB972 is up 1%.

When I compare the 10 year returns, TDB972 has actually been slightly stronger. I think that $10,000 invested would be 23,600 for 972, and 22,500-ish for 900. Obviously that is backwards looking. But the returns over the years between the two have been comparable… sometimes one does a little better than the other. The fund has been around since 1987, and it’s proven. I guess those are reasons why the higher mer didn’t bother me. And maybe, if Shopify and other tech stocks implode within a year, I’ll switch back to TDB900.

But you are right, it definitely is not well diversified. My whole portfolio is off for sure. Lots of banks and lots of energy.

[bdub]

Originally Posted by Fisherdan

Hi bdub. Please pick away! Appreciate the help.

Ok, well how about I show you how you can replicate the performance of that fund for a much cheaper and over your investing time frame save you thousands and thousands of dollars in fees? If you go to the fund prospectus you can see the top 25 holdings make up 83% of the portfolio. It breaks down the percentage of each holding as a total of the fund. Royal Bank is an 8.4% weight and so on. (Another thing that sticks out is that the fund holds all of the Big 5 banks, RY, CM, TD, BNS, and BMO. No reason imo to hold all of them. Pick a couple of them and add in a life insurer and make the total weighting in your portfolio add up to something close to what the fund has, in this case 46% financials.)

Do the same with the energy sector, and so on. At the end of this process you will come up with a portfolio of say 20 - 25 names if you match it exactly. Brokerage fees for buying 25 names will run about $250 and the performance of your portfolio will differ marginally from what the fund will do over time. Maybe a hair better or worse from year to year.

So on a say a $500,000 portfolio the difference on the MER going to TD vs you setting it up yourself is material. $10150 per year vs $250. The more you have to invest the more it make sense from a fee perspective of course but even at a much lower portfolio values it make sense. That 2% you are saving setting it up yourself will more than make up for any extra performance (alpha) that TD or most any other mutual fund managers can provide. This part of my statement is well researched and proven. Few mutual or other fund managers can provide any sort of outperformance over their respective benchmarks.

Something to think about and just my opinion again.

[Fisherdan]

Originally Posted by bdub

Ok, well how about I show you how you can replicate the performance of that fund for a much cheaper and over your investing time frame save you thousands and thousands of dollars in fees? If you go to the fund prospectus you can see the top 25 holdings make up 83% of the portfolio. It breaks down the percentage of each holding as a total of the fund. Royal Bank is an 8.4% weight and so on. (Another thing that sticks out is that the fund holds all of the Big 5 banks, RY, CM, TD, BNS, and BMO. No reason imo to hold all of them. Pick a couple of them and add in a life insurer and make the total weighting in your portfolio add up to something close to what the fund has, in this case 46% financials.)

Do the same with the energy sector, and so on. At the end of this process you will come up with a portfolio of say 20 - 25 names if you match it exactly. Brokerage fees for buying 25 names will run about $250 and the performance of your portfolio will differ marginally from what the fund will do over time. Maybe a hair better or worse from year to year.

So on a say a $500,000 portfolio the difference on the MER going to TD vs you setting it up yourself is material. $10150 per year vs $250. The more you have to invest the more it make sense from a fee perspective of course but even at a much lower portfolio values it make sense. That 2% you are saving setting it up yourself will more than make up for any extra performance (alpha) that TD or most any other mutual fund managers can provide. This part of my statement is well researched and proven. Few mutual or other fund managers can provide any sort of outperformance over their respective benchmarks.

Something to think about and just my opinion again.

Bdub, that is brilliant. Thank you!

I don't have close to that 500 000 in your example, but I do have enough that it would make a significant difference.

And maybe more importantly, this gives me an excellent place to start researching. I've been kind of stuck on how or what to research. I'm going to start by making a spreadsheet with the stocks on the prospectus, categorizing by sectors, and simply researching the companies.

On another note, on a much earlier post, you had a link to a macrovoices podcast. Since then, I have been listening to them, and it is very interesting and well done. Am I wrong in saying that they do seem somewhat perma-bearish, and too focused on trying to time the markets? For example, I listened to a few episodes from around the bottom of the coronavirus crash, and they definitely missed the turnaround. But overall, it is interesting to listen how investments, commodities, currencies, politics and even war intersect.

Do you have any other recommended reading or listening resources for investing?

[Scott h]

Originally Posted by nelsonob1

Current rates are no high. In the historical sense they are quite modest, but given the rate of Inflation, they are extremely low. The central bank is banking that these large hikes will create caution and change behavior, but at current interest levels they are not pulling enough liquidity out of the market to make a direct economic impact. Rates will increase imo for at least another year and stay at those levels for longer, even if recession takes hold . BUT there is no reason to panic. It's much better to have higher costs of borrowing than higher cost of living.

Current rates aren't high at all by historical standards, but what is high is the purchase price of properties. It's one thing having a $500,000 mortgage at 1.5% ($2000/mnth), and quite a different thing having that same mortgage at 5.25% ($3000/mnth). At the end of the day it all boils down to how much a person can pay each month. If rates stay where they are (or higher as will happen next week), prices will have to come down for people to be able to make their payments.

[bdub]

Originally Posted by Fisherdan

Do you have any other recommended reading or listening resources for investing?

Whenever someone asks me for reading suggestions I usually suggest The Wealthy Barber as a good starter. Its an easy read and full of good basic advice. I usually pick up any copies I happen to see at used book stores to give away. From there I would suggest some type of introductory book on reading financial statements. Enough to give yourself some idea of what you are looking at when you look at financial statements. Youtube is a great resource for this type of thing. The Intelligent Investor is a good place to start really getting into the weeds. I think the value approach that is preached in that book will go a long ways to keeping you out of trouble if you continue down the path of managing your own portfolio. My original copy is now held together with duct tape.

From there it really is a proverbial rabbit hole of continuous learning. I really enjoy reading about financial history and behavioural finance. The Misbehaviour of Markets and The Inner Lives of Markets are two good ones on the behavioural side.

But the first three recommendations are a good start to get going.

Other resources. I read almost every quarterly report and conference call transcripts of the companies I hold. Not to often that I will miss out on that and never on my larger holdings. Daily I keep track of interest rates here and the US, several commodities like oil, nat gas, fertilizer, currency exchange rates and major global equity markets. I don’t think anyone needs to go that nuts but it is valuable to be aware of what is going on with these factors. Especially interest rates.

And the importance of interest rates on valuation cannot be overstated I don’t think. I would recommend trying to learn how to do a discounted cash flow analysis despite the problems with this model. If nothing else it will give you a really good idea of how asset prices are affected by changes in interest rates. Youtube has tons of examples.

Podcasts like Macrovoices are great mediums to get insight into what market experts are looking at. Alot of their focus does seem to be on short term trading. They were late to the turnaround post March 2020 but they were early to call the crash. I agreed with their Covid call and raised a good chunk of cash before the big drop. The turnaround was pretty fast and alot of people I think expected it to drag on. But as usual the market does it’s best to make a fool of most participants.

Anyway I hope I provide some value out of this long winded reply. I don’t think you need to get to far into the weeds to be successful. Alot of it will boil down to controlling the fear and greed factor and staying away from to much speculation in your portfolio. Sticking with established companies paying a sustainable dividend, be diversified. Those two things alone will keep you out of most trouble.

Here is a pic of my ever growing library if you get past the first couple suggestions.




Sent from my iPhone using Tapatalk

[Dean2]

bdub

Excellent advice, as usual.

[Fisherdan]

Thanks bdub. Appreciate all the suggestions. Just downloaded the wealthy barber on audible. I read it years ago, but will revisit again.

I started a spreadsheet of 35 companies (so far) to investigate. Looks like I’ll be busy for a while.

[Twisted Canuck]

Originally Posted by Dean2

bdub

Excellent advice, as usual.

Agree, some good titles mentioned there. I will throw another in that I found helpful, as far as developing a mindset for investing.


The Investment Zoo: Taming the Bulls and the Bears https://a.co/d/5wMEIwi

[KGB]

Anybody looking for a good dividend paying company? Well we’ll well, what have I found! It’s an Israeli shipping company, started trading in US last year but has been around for many years…

[eric2381]

That is not sustainable. I’d never buy into a company like that.

[DiabeticKripple]

Originally Posted by eric2381

That is not sustainable. I’d never buy into a company like that.

take your money and go under, leaving you with nothing but the dividends you collected. no thanks.

[Dean2]

Originally Posted by DiabeticKripple

take your money and go under, leaving you with nothing but the dividends you collected. no thanks.

Both you and Eric should do some detailed research on ZIM before you jump to that conclusion. I did just a surface scan, will do more this coming week, but at first glance it is more than interesting enough to look further into it. Thanks for posting that KGB, might make a decent short hold if nothing else, too bad we missed the Aug 26 Ex date for this current dividend.

[eric2381]

Good luck.

[KGB]

Originally Posted by Dean2

Both you and Eric should do some detailed research on ZIM before you jump to that conclusion. I did just a surface scan, will do more this coming week, but at first glance it is more than interesting enough to look further into it. Thanks for posting that KGB, might make a decent short hold if nothing else, too bad we missed the Aug 26 Ex date for this current dividend.

Thanks for the compliment. Yes, the company has been around for many years and from what I learned it was very profitable. They are originally from Israel but have contracts all over the world. Dividends are crazy high, like from selling coke or meth, lol! They must be very profitable…

[Glion]

Originally Posted by KGB

Thanks for the compliment. Yes, the company has been around for many years and from what I learned it was very profitable. They are originally from Israel but have contracts all over the world. Dividends are crazy high, like from selling coke or meth, lol! They must be very profitable…

It seems to be a reputable company. It's dividend is variable based on income so that being said their income is dropping as shipping rates are dropping. At peak they were about 10k and currently around 6k though still higher than pre covid of 2k. Also fuel will be biting into profits as well. I believe their stock and dividend will subsequently be dropping. However they appear to carry very little debt and seem to return great amounts of profit to shareholders. So personally I would conclude their dividend rate will remain quite high just not maybe the 60% it is at. That's just my initial thoughts after a quick look into them.