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  #2851  
Old 01-23-2023, 09:00 AM
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Dean2 Dean2 is offline
 
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I don’t like to throw shade on the sunny side of the street but there are a number of points to consider. The inversion of the yield curve is actually worse now than it was in Nov, 10 year rates have dropped from nearly 4% to 2.87 and the one year rates are higher than they were in Dec.
These are U.S. rate curves but the Canadian one is similar, and if anything even worse because our current 10 year is down to 2.87%
Jan 2023

Oct 22

Jan 22


Rents are rising at more than 15% across Canada, there is a housing shortage for purchase and rent and the only reason house prices have dropped a little, still far above 2020, is they are now so expensive many have to keep renting. Immigration is bringing in 2.5 times more people than we are building housing per year so the housing issues will only continue to get worse.

There are more jobs than people that want to fill them. Despite the headlines of large layoffs in Canada and the U.S. large Tech, those folks will all have jobs in a month and they won’t be filling all the roles that are already empty in all the other industries. The economy is still growing at over 3%, consumer spending has not abated. That is just the tip of the iceberg, without getting into Government spending, rising taxes, highly inflationary items like carbon taxes, soaring utility bills and rising property taxes. Even if price increases were to stabilize and inflation comes down using the the government numbers to the target of 2-3%, the prices sure aren’t coming back down.

The Bank of Canada may well pause their rate increases after this next one, but they aren’t going to start lowering rates in the next year. In fact, I expect to see the Bank of Canada rate at least 2% higher than it is now by year end because no matter how the governments fudge the numbers, inflation is being very sticky. We are still well over 6%, even by the official numbers. To get back to 2%, they need to knock a lot of stuffing out of the economy, and that only happens with mass job loss, and recession caused by even higher rates.

The real price inflation the average consumer sees in his everyday living costs is not going away anytime soon. Anyone with variable rate debt has not finished seeing their payments go up, and it is way premature to be buying into the bond market for anything over a 3 year maturity. My advice, stick to Blue Chip companies that have pricing power and the deep pockets to withstand downturns, and that pay you a regular dividend. Money in a sock is rapidly depreciating due to inflation, GICs and Bonds are not even close to keeping up to inflation, especially after tax, so the only choice is real assets like land and companies that produce a good profit and grow every year.

Good luck to all.

Last edited by Dean2; 01-23-2023 at 09:09 AM.
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  #2852  
Old 01-23-2023, 09:19 AM
cowmanbob cowmanbob is offline
 
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Thanks Dean.
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  #2853  
Old 01-23-2023, 02:22 PM
raab raab is offline
 
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Quote:
Originally Posted by Dean2 View Post
I don’t like to throw shade on the sunny side of the street but there are a number of points to consider. The inversion of the yield curve is actually worse now than it was in Nov, 10 year rates have dropped from nearly 4% to 2.87 and the one year rates are higher than they were in Dec.
These are U.S. rate curves but the Canadian one is similar, and if anything even worse because our current 10 year is down to 2.87%
Jan 2023

Oct 22

Jan 22


Rents are rising at more than 15% across Canada, there is a housing shortage for purchase and rent and the only reason house prices have dropped a little, still far above 2020, is they are now so expensive many have to keep renting. Immigration is bringing in 2.5 times more people than we are building housing per year so the housing issues will only continue to get worse.

There are more jobs than people that want to fill them. Despite the headlines of large layoffs in Canada and the U.S. large Tech, those folks will all have jobs in a month and they won’t be filling all the roles that are already empty in all the other industries. The economy is still growing at over 3%, consumer spending has not abated. That is just the tip of the iceberg, without getting into Government spending, rising taxes, highly inflationary items like carbon taxes, soaring utility bills and rising property taxes. Even if price increases were to stabilize and inflation comes down using the the government numbers to the target of 2-3%, the prices sure aren’t coming back down.

The Bank of Canada may well pause their rate increases after this next one, but they aren’t going to start lowering rates in the next year. In fact, I expect to see the Bank of Canada rate at least 2% higher than it is now by year end because no matter how the governments fudge the numbers, inflation is being very sticky. We are still well over 6%, even by the official numbers. To get back to 2%, they need to knock a lot of stuffing out of the economy, and that only happens with mass job loss, and recession caused by even higher rates.

The real price inflation the average consumer sees in his everyday living costs is not going away anytime soon. Anyone with variable rate debt has not finished seeing their payments go up, and it is way premature to be buying into the bond market for anything over a 3 year maturity. My advice, stick to Blue Chip companies that have pricing power and the deep pockets to withstand downturns, and that pay you a regular dividend. Money in a sock is rapidly depreciating due to inflation, GICs and Bonds are not even close to keeping up to inflation, especially after tax, so the only choice is real assets like land and companies that produce a good profit and grow every year.

Good luck to all.
I agree, interest rates will continue to climb Dean. I think you're wrong on the land though. The rising interest rates will be hard on farmers who usually carry a lot of debt in their operations. The result will be more land coming to market as farmers raise capital to pay down some debt. In addition, I think we will see a lot of recreational properties up for sale as people no longer want to carry two mortgages.

I also agree with putting money into blue-chip businesses although I think the market will take a hit too as investors weigh ROI's on Stocks vs Treasuries. As the rates increase I think you'll see folks moving out of the stock market and into treasuries with a guaranteed return.

Just my 2 cents but it's a hard market to invest in right now.
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  #2854  
Old 01-24-2023, 06:03 AM
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The FED and BOC only control the short end of the bond market. They set the FED funds rate and the bond market prices the rest via supply and demand. Something happened at the end of October and you can guess what that was. These are the US treasury rates as of late October and today.

IRX - 13 week rate Oct 24 @ 3.91% Today @ 4.53
FVX - five yr rate Oct 24 @ 4.36 Today @ 3.625
TNX - 10 yr rate Oct 24 @ 4.24 Today @ 3.52
TYX - 30 yr rate Oct 24 @ 4.36 Today @ 3.691

The bond market is telling the Feds that something broke back in late October imo. Time will tell but in hindsight that was probably the pivot point to shift some capital back into long duration assets. As an example gold has gone from $1627 on Nov 3 to $1937 this morning. The TLT, 20+ year treasury bond ETF has gone from $92.40 on Oct 24 to $105.70 today. We will see going forward as events unfold but that's what has happened recently. We will see if the FED is screwing up and the bond market is correct in by the what unfolds over the next year or so.
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  #2855  
Old 01-24-2023, 09:57 AM
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Raab - When I was talking about land, to me that is all property that does not include your own home. To be viable it has to produce at least 5% rate of return in cash annually. So I agree, raw farmland, unless you bought it a long time ago or it has significant oil, gravel or mineral lease revenue, will have trouble doing that. When I said land I was thinking more in terms of residential and commercial rental properties. Land is still going up quite rapidly and rents are rising to reflect its higher value as well as the higher running costs and interest rates. Doesn't take too many properties to make for a very comfortable retirement living off the rents.

Bdub - I agree the Bond market thinks something broke. I am not convinced they are right that long rates should be anywhere near as low as they think because that implies significant rate easing 2 years out. I really don't see short rates being lower in 2025. However, like I have often said, I don't own a crystal ball so 50-50 chance I am wrong. All I know is I will be far better off with Blue Chip div stocks yielding 4-6 a year in dividends or rental real estate with a 5% cap rate now and holding through 2025, than I would be buying 2 to 3 year maturity 5% Bonds or GICs, or 4% ten to twenty year bonds.

We shall see who turns out to be correct.

Last edited by Dean2; 01-24-2023 at 10:07 AM.
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  #2856  
Old 01-25-2023, 09:54 AM
EagleEyes EagleEyes is offline
 
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Thanks guys for your in site. Its always appreciated.
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  #2857  
Old 01-26-2023, 07:07 AM
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Dean - you sure could be right on rates going forward. It will all depend on what happens with inflation and the economy going forward. We have China re-opening after Covid, an ongoing war in Europe and who knows what else may happen. It sure was a tough year for investors. The typical 60/40 equity/bond portfolio had its worst year in our lifetimes last year. There really wasn't many places to hide other than energy for the most part.

There sure is a lot to be said for holding solid dividend paying companies, especially ones that have a history of steady and increasing dividends. The defensives like the utilities and telcos should do well if rates fall just from the perspective of the present value of their future cash flows becoming more attractive. But vice versa if rates do rise from here, those cash flows don't look quite as good. They also have that type of business that is relatively appealing if we do enter a stronger recession than expected.

I haven't really done much with my portfolio this year, still overweight energy, market weight utilities telcos, underweight financials. I finally sold some gold and added a bunch to the gold miners on Oct 24. I also got nailed with a small position in Algonquin Power which we unloaded entirely. Even the so called safe defensive utilities can bite you in the rear end if you neglect the homework. Lesson learned.

We got the .25% increase from the BOC which was expected and the messaging that they are pausing for now. Here is a copy/paste from the linked article which is behind a paywall.
And like you say, good luck all.

“We have raised rates rapidly, and now it’s time to pause and assess whether monetary policy is sufficiently restrictive to bring inflation back to the 2-per-cent target,” Bank of Canada Governor Tiff Macklem said in a news conference after the rate announcement.

“To be clear, this is a conditional pause,” Mr. Macklem added. “If we need to do more to get inflation to the 2-per-cent target, we will.”

The bank lowered its forecast for inflation on Wednesday. It also reiterated that it expects the economy to “stall” in the first half of the year, but does not foresee a significant recession.

The bank now expects consumer price index inflation to fall to about 3 per cent by the middle of this year, and to 2.6 per cent by the fourth quarter. It sees inflation returning to the 2-per-cent target in 2024.

The annual rate of inflation remains well above those levels, clocking at 6.3 per cent in December. But it has trended down from a peak of 8.1 per cent in June. Price pressures continue to ease thanks to a drop in oil prices and improvements in global supply chains, plus the slowing effects on the economy of the bank’s rate increases.

The expected drop in inflation comes alongside a slowdown in the Canadian economy. The bank expects growth to flatline through the first half of 2023, as higher borrowing costs squeeze Canadians’ finances and weigh on consumer spending and business investment.

“It’s just as likely that we’ll have two or three quarters of slightly negative growth as slightly positive growth,” Mr. Macklem said. “So yes, it could be a mild recession. It’s not a major contraction.”

https://www.theglobeandmail.com/busi...-2023-macklem/
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  #2858  
Old 01-26-2023, 08:02 AM
ehrgeiz ehrgeiz is offline
 
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July 15, 2020

"Bank of Canada Governor Tiff Macklem assured Canadian households and businesses that borrowing rates will remain at historic lows for the foreseeable future."

Early 2022 commences a campaign of the highest rate increases in a generation.

Not sure if totally incompetent or intentionally deceptive.


Anyway, I was listening to an interesting take on Jerome Powell. The person was profiling Powell and figures that as a 70 year old he doesn't want his legacy to be the one who let inflation run rampant and he doesn't have a lot of time left to nurture a slow correction. This persons conclusion was more and more dramatic rates increases down south until unemployment rises significantly.
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Old 01-26-2023, 09:36 AM
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The big issue with tying the FFR to unemployment is for years large companies could outbid SME enterprises for talent. Even with higher interest rates and the large layoffs in the last three months, all of these "relatively productive" people will rotate to SME with reasonable similar perks. The productivity gains in all of these small and medium sized companies in the next 5 years in going to surprise a lot people. It would not surprise me at all if small caps outperform even high flying tech/oil co. in a recession even with higher capital costs. Bonds on the long end of the curve will be gobbled up if then then get back above 4%. This may actually give the Fed some space for a "market/economy" driven multi year soft landing as opposed to the Greenspan *****ing the bubble recession.
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  #2860  
Old 01-26-2023, 12:47 PM
fishtank fishtank is offline
 
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Quote:
Originally Posted by ehrgeiz View Post
July 15, 2020

"Bank of Canada Governor Tiff Macklem assured Canadian households and businesses that borrowing rates will remain at historic lows for the foreseeable future."

Early 2022 commences a campaign of the highest rate increases in a generation.

Not sure if totally incompetent or intentionally deceptive.


Anyway, I was listening to an interesting take on Jerome Powell. The person was profiling Powell and figures that as a 70 year old he doesn't want his legacy to be the one who let inflation run rampant and he doesn't have a lot of time left to nurture a slow correction. This persons conclusion was more and more dramatic rates increases down south until unemployment rises significantly.
Powell going to make the market bleed with a 0.5% on Feb 1st . I don’t think people took his last warning of more rate hike and pain are coming seriously .
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  #2861  
Old 01-26-2023, 01:38 PM
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Originally Posted by fishtank View Post
Powell going to make the market bleed with a 0.5% on Feb 1st . I don’t think people took his last warning of more rate hike and pain are coming seriously .
You could be right but the market is strongly betting it will only be a 1/4 point with odds are sitting at 98.1%. Seeing Canada signal a pause means a good chance the FED will too.

That said, if the market is wrong and we do see a half point it will send a bit of a shock I would imagine, plus kick the CDN$ in the teeth.

https://www.cmegroup.com/markets/int...atch-tool.html
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  #2862  
Old 02-01-2023, 02:31 PM
ehrgeiz ehrgeiz is offline
 
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1/4 point with the expectation of ongoing increases. 2% objective will require a fair bit more pain and time.
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  #2863  
Old 02-01-2023, 05:39 PM
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1/4 point with the expectation of ongoing increases. 2% objective will require a fair bit more pain and time.
It doesn’t really look like it. Markets are pricing in rate cuts in Canada before year end. Pause at next meeting here and in the States and cuts coming before year end.
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  #2864  
Old 02-01-2023, 07:13 PM
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It doesn’t really look like it. Markets are pricing in rate cuts in Canada before year end. Pause at next meeting here and in the States and cuts coming before year end.
I just don't see any rate cuts coming before the middle of 2024. Maybe the markets are pricing them in but I think Allan Greespan said it best;
Irrational exuberance"
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  #2865  
Old 02-01-2023, 11:26 PM
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Tech stocks are recovering nicely, Nvidia hit $200 today…a month ago it was at $140…
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  #2866  
Old 02-02-2023, 12:26 AM
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Quote:
Originally Posted by Buckhead View Post
I just don't see any rate cuts coming before the middle of 2024. Maybe the markets are pricing them in but I think Allan Greespan said it best;
Irrational exuberance"
There’s a lot of folks playing the market who don’t understand the underlying numbers. Which I think causes a distortion.

Same thing happened with Crypto except with Crypto there’s nothing to calculate because it has no earnings.
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  #2867  
Old 02-02-2023, 09:27 AM
The Elkster The Elkster is offline
 
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Quote:
Originally Posted by Buckhead View Post
I just don't see any rate cuts coming before the middle of 2024. Maybe the markets are pricing them in but I think Allan Greespan said it best;
Irrational exuberance"
My guess is regardless of what the real economy is doing we'll start seeing an easing going into the next US election year 2024 and I suspect that is what the market is considering as well. Errrr I mean na politics don't influence the Fed....

Welp if things ever do go badly recessionary, they can always quickly bring in 0.0001% interest rates with interest only payment options and offer unlimited gov't back guarantees on that debt. Houses to a billion! Or even more considering the number of zeros is limitless! Everyone wins
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  #2868  
Old 02-02-2023, 06:03 PM
Drewski Canuck Drewski Canuck is offline
 
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Default Curbing Inflation through Unemployment, Not going to happen

Was in Florida in January for holidays. On the news was how tight the job market was.

In Brevard County UNemployment is 2 %. Hiring signs everywhere and for alot of good paying jobs.

Brevard County alone had 68 openings unfilled. Can't even attract applications.

WHY IS INTEREST RATES GOING UP AND JOBS GROWTH STAYING STRONG said the Economist??

Well Children, it seems that alot of the Job Market was old people who are now retiring, and taking their pension, and the new positions are left vacant as no one wants to do the work.

As long as you have a shrinking labour pool with retirees STILL SPENDING THEIR PENSION MONEY, you are not curbing consumer demand by taking away the Income from jobs.

We are now seeing the consequences of a falling birth rate as the young workers are fewer than the old workers that are retiring.

All the Rate increases in the world is not going to fix the "employment problem". This knee jerk reaction fails to consider the reality of population age demographics.

Drewski

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Old 02-03-2023, 09:53 PM
Fisherdan Fisherdan is offline
 
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Quote:
Originally Posted by Drewski Canuck View Post
Was in Florida in January for holidays. On the news was how tight the job market was.

In Brevard County UNemployment is 2 %. Hiring signs everywhere and for alot of good paying jobs.

Brevard County alone had 68 openings unfilled. Can't even attract applications.

WHY IS INTEREST RATES GOING UP AND JOBS GROWTH STAYING STRONG said the Economist??

Well Children, it seems that alot of the Job Market was old people who are now retiring, and taking their pension, and the new positions are left vacant as no one wants to do the work.

As long as you have a shrinking labour pool with retirees STILL SPENDING THEIR PENSION MONEY, you are not curbing consumer demand by taking away the Income from jobs.

We are now seeing the consequences of a falling birth rate as the young workers are fewer than the old workers that are retiring.

All the Rate increases in the world is not going to fix the "employment problem". This knee jerk reaction fails to consider the reality of population age demographics.

Drewski

Drewski
Have you heard of ChatGPT? AI software that can quickly spit out a quality essay, memo, speech, etc. I think it is inevitable that many jobs that exist today will be wiped out by artificial intelligence in the next few years. At these interest rates, companies that don’t embrace the tech will simply be inefficient and lose out to a much leaner and more effective competition.

You’re right that the demographics are wonky, and that the job market is crazy. The demographics are what they are. But I think that the job market will sort itself out in a bit of time.
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Old 02-04-2023, 05:30 AM
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Have you heard of ChatGPT? AI software that can quickly spit out a quality essay, memo, speech, etc. I think it is inevitable that many jobs that exist today will be wiped out by artificial intelligence in the next few years. At these interest rates, companies that don’t embrace the tech will simply be inefficient and lose out to a much leaner and more effective competition.

You’re right that the demographics are wonky, and that the job market is crazy. The demographics are what they are. But I think that the job market will sort itself out in a bit of time.
Don’t forget the 24 hr automated McDonald’s with no employee …
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Old 02-04-2023, 07:15 AM
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Quote:
Originally Posted by Drewski Canuck View Post

WHY IS INTEREST RATES GOING UP AND JOBS GROWTH STAYING STRONG said the Economist??

Well Children, it seems that alot of the Job Market was old people who are now retiring, and taking their pension, and the new positions are left vacant as no one wants to do the work.


Drewski

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The labour force participation rate still hasn't reached the pre-pandemic level. It is not just the older demographic not returning, the younger crowd isn't as well. That's why we are seeing the large number of vacancies in the lower paid, entry level/service industry type of jobs. How do we get those young workers back into the labour market and out of mom's basement?

From the St. Louis Fed,
"When the pandemic hit, the sharpest decline in the LFPR was for workers between the ages of 20 and 24. Their LFPR decreased from 73% to 64.4% in 4 months before increasing again. However, at the end of 2022, the LFPR for 20- to 24-year-olds still hadn’t fully recovered and remained 1.7 percentage points below its January 2020 value.

This overall pattern is similar but less extreme for the other age groups. Although no age group fully recovered by the end of 2022, the 25-54 group was closest, at 0.7 percentage points below its January 2002 level. There’s been much discussion of older workers retiring early (and permanently) during the pandemic, and the 55+ group remained 1.4 percentage points below its January 2020 level as of December 2022, with no sign of further recovery."

https://research.stlouisfed.org/publ...s-who-are-they

The Phillips curve, the inverse relation between employment and inflation seems to be dead this time around, again. But the Fed appears uncomfortable declaring victory over inflation when employment is still strong by the sound of JP's comments last meeting.

The lag effect of the rate increases is going to show up soon. Was reading an article talking about how long people can hang on with mortgage and loan debt payments taking a huge chunk of their disposable income. Many households will be at the end of their ropes by year end. Right now a large part of their income is going to debt, food and utilities and the savings are being eaten away. The personal savings rate in the States has nosedived as people are using savings to get by.

https://fred.stlouisfed.org/series/PSAVERT
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Old 02-06-2023, 08:38 AM
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Quote:
Saudi Arabia says they're now 'open' to the idea of trading in currencies besides the US dollar
Things about to heat up in the Middle East…..
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  #2873  
Old 02-06-2023, 10:31 AM
Grizzly Adams1 Grizzly Adams1 is offline
 
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It's impossible to make predictions you can bet the farm on when the world economy is based on dishonesty and greed, that's why so many individual investors and investment companies lose their shirts , repeatedly. It's not what you know, it's what you don't know, that will destroy you. The FTX collapse being merely the latest.

https://www.youtube.com/watch?v=U1dpWiZoiJU

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Old 02-06-2023, 10:32 AM
Grizzly Adams1 Grizzly Adams1 is offline
 
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Things about to heat up in the Middle East…..
The US as a super power is done.

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  #2875  
Old 02-12-2023, 11:17 PM
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Default Google

Alphabet stock selloff on Thursday and Friday. Goog stock fell 8% on Thursday and another 5% on Friday. Currently is at $95.
Is it a good time to load?
I mean it fell because of an AI glitch. No one will be using google 13% less because of that. Analysts price target before the glitch was $125
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  #2876  
Old 02-13-2023, 08:11 AM
eric2381 eric2381 is offline
 
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Myself, I would not buy google at these prices.
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  #2877  
Old 02-13-2023, 09:56 AM
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I like potentially easy money as much as the next guy, that being said, I have a hard time buying tech stocks and haven't yet purchased any.
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  #2878  
Old 02-13-2023, 11:32 AM
Map Maker Map Maker is offline
 
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Re:Tech stocks


Kramer’s mad money tv show deals a lot with tech stocks if you want insight.

I bought Netflix at its lows last year and recently sold half when it doubled.

I also bought some Microsoft during the lows which I’m happy with so far.
I also got google and amazon, which haven’t done much yet, but I think they will around for quite a while so I got them tucked away in my TFSA.
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Old 02-13-2023, 12:01 PM
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I backed up my truck and loaded on GOOG what I could at $95.
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Old 02-13-2023, 01:21 PM
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Millenials are the Generation, born 1981 to 1996, who have been the most vocal about telling Boomers they screwed up the world, and they are going to show them how to live and do the world much better. Bankruptcies across all age groups are only going to get worse over the next 3 years.

https://www.bnnbloomberg.ca/nearly-h...tudy-1.1883092

Quote:
Around half of all insolvencies filed in 2022 were by millennials, despite only accounting for less than 27 per cent of the Canadian population aged 18 and older, according to a new study.

A study conducted by licensed insolvency trustees Hoyes, Michalos and Associates Inc. released Monday, revealed that 49 per cent of insolvencies in 2022 were filed by millennials. The study also found millennials were the only age group to see a rise in unsecured debt obligations during the year.

“The average insolvent millennial is just 33 years old, yet they are 1.7 times more likely than Baby Boomers and 1.4 times as likely as Generation X to file insolvency, relative to the population,” Ted Michalos, a licensed insolvency trustee and co-founder at Hoyes, Michalos and Associates, said in a news release.

“We’ve noticed an overall trend since 2016 that the average insolvent borrower continues to get younger, with student loan debt and extremely high-cost loans being the main drivers of their insolvency,” he said.

AVERAGE MILLENNIAL DEBT

Unsecured debt obligations, meaning debt that is not otherwise backed by an asset, pushed millennials toward insolvency during the year, according to the study. The age group had an average unsecured debt load of $47,283 in 2022.

“So it's kind of the perfect storm of a bunch of factors happening that have led to a massive increase in insolvencies for millennials,” Hoyes said in an interview with BNN Bloomberg Monday.

Hoyes said that unlike Baby Boomers and Generation Xers, millennials are “starting off their life” with higher levels of student loan debt.

“And when you're starting off in the hole, it makes it difficult to buy a house, get married, have kids and so you end up resorting to things like credit cards to make ends meet [or] high-cost loans,” he said, adding that factors related to the pandemic have put millennials back even further.

Student loans accounted for 30 per cent of unsecured debt loads held by the age group last year, according to the study. About 35 per cent of millennials carried debt from student loans, with an average of $16,725 owed, the study found.

Reliance on high-cost loans among the age group increased by 17.4 per cent in 2022 from the previous year, the study said. Around 55 per cent held debt from at least one high-cost loan, with an average debt of $11,940.

Credit card debt was held by 87 per cent of millennials involved in the study in 2022. Average credit card debts held by the age group increased by 1.5 per cent year-over-year to $13,948.

The Canada Emergency Response Benefit (CERB) was a factor in rising tax obligations held by the age group, the study said. Around 46 per cent of millennials had tax-related debt, rising nine per cent from the previous year.

Tax debts held by millennials in the study hit an average of $12,137 last year.

HIGH-COST LOANS

Other findings from the study included increased reliance on rapid high-cost loans among all insolvent debtors regardless of age group, as 53 per cent of total insolvent debtors had at least one loan of that kind in 2022.

Rapid high-cost loans refer to things like payday loans, high-interest lines of credit and installment loans. The study noted that the usage of these types of loans rose last year.

“We are seeing not just an increased use of traditional payday loans, but a much more dramatic rise in the use of larger, longer-term high-cost loans,” Doug Hoyes, a licensed insolvency trustee and co-founder at Hoyes, Michalos and Associates, said in the release.

The study defined this type of loan based on criteria including loans with an easy application process, often with no collateral required. Other criteria included fees or interest rates at 29.99 per cent or higher, as well as a high likelihood of approval irrespective of an individual’s credit score.
“Despite subprime lending being a small component of overall lending in Canada, its fast growth is creating a crisis among heavily indebted borrowers and these Rapid Loans are a significant driver of consumer insolvencies,” said Hoyes.

The study said the average insolvent debtor in 2022 with a loan of this type owned money to four different lenders, with a total debt load of $12,100. Last year’s figures marked an increase from 2021, where the average insolvent debtor owed $10,819 to 3.8 different lenders.

METHODOLOGY

Data for the study was compiled using information from those who filed a consumer proposal or personal bankruptcy with Michalos and Associates. The study used data from 2,700 personal insolvencies in Ontario, between Jan. 1, 2022, and Dec. 31, 2022. The results from 2022 were compared against previous studies dating back t
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