Markets and Commodities

[KinAlberta]

Volatility. There’s a lot of investor and professional money and a huge amount of leverage involved in playing the short-term market conditions.

Vaccines are now on the horizon so in a few years time the pandemic impacts should be history.


Wall Street ends sharply lower as pandemic fears resurge | Reuters

https://www.reuters.com/article/us-u...-idINKBN27S21Q

[bdub]

Volatility has been running roughly double what it was pre covid in stocks, gold and oil. 1-2% daily moves in markets is the new normal it seems.

[The Elkster]

Originally Posted by Dean2

The comments made about shares being highly over valued, Ponzi scheme etc, what is your solution. If you put a $100,000 in your mattress n 1980, you would be pretty disappointed with what you can buy with that money today, so unless you own appreciating assets, sitting on straight cash is a recipe for ending up in thee poor house. To stay ahead of inflation, your money has to be in a business that produces growing sales and profits, in land in the right location or the market. You pick which one, or the mix of those but leaving cash in a can is not a good idea.

I have also said this MANY times before, if your earnings in the stock market are taxable in the year you buy and sell, then what you gain by trying to time the market is severely constricted. Even if your investments are in tax deferred accounts is is pretty easy to get this wrong. Missing the run up will cost you far more than the drop you avoided. RBC shares have gone from 105 to 75 Feb 22 to March 21. They are back at $100 today. If you got the timing just right you made a ton, if you sold a little late, March 4th was at 94, Mar 14 87 and have not bought back in yet waiting for the big drop predicted for this fall and winter you really don't want to miss buying back in on the next drop. If you just sat on your shares for the last 8 months you are back to almost even with Feb 22nd, you are up $17 from Dec 22 2018 and have collected 1.94 cents in Dividends since Dec 2018.

Own high quality dividend paying stocks, the best in each category. If you had put $100,000 into Royal bank shares in 1980, instead of your mattress, you would be a multi millionaire today with $6.5 million dollars in stock, and $325,000 a year in dividend income instead of the equivalent of $50,000 in purchasing power for the cash. (Straight buy and hold with dividends reinvested in the Drip). If you did buy and sell trying to time it you would be lucky to have half as much, just from paying taxes on the gain, let alone missing the run ups. If you had done the same thing with BNS you would only have 1.5 million, proving that holding the best in class is key, but that is still a pot load better than cash in a tin. If you futz around with the pumped up, get rich quick stuff you would likely be broke today. (The values for RBC and BNS are actually understated by quite a lot as my calculator actually only goes back to 1995 for this kind of thing).

I don't make a habit of trying to time the market. I've done well in the market with the slow and steady approach. I would never have pulled money out on the fear of a standard recession. I saw the pandemic coming and saw it as a huge/unprecedented blackswan event...and that it has been. Being close to retirement I pulled tax sheltered money to be cautious and try to preserve what I have over the unknown period.

Seeing the lengths to which gov'ts will go to prop up a market on the brink has given me some peace of mind to put my money back in the market. I will do so although at this point I think I'll wait to see how this latest outbreak is going to play out with massive new business shutdowns likely.

Covid aside I don't like what I see in the market in the way of a break from reasonable valuations because "reasons" but you can't do anything about market sentiment and leaving money in cash is just going to mean inflation eating it all away. The money printing is off the charts! There really is no choice but to be in the market...but IMO the choice is a pretty poor one when you look at the underlying fundamentals. We are now playing in a monopoly money world. We'll see how that plays out but it leaves me feeling very uneasy. Its actually accelerated my retirement plans. Spend it while ya still got it.

Happy investing

[bdub]

If you think the world is running on monopoly money, which it is, then cash is trash. Governments are printing like crazy, the money supply is growing like crazy and governments are spending like crazy. Gold is one of the few things that makes any sense in these conditions. There is still alot value out there in some beaten down stuff I think. The gains in tech have pulled most of the weight in the index, its not cheap.

[Dean2]

Originally Posted by bdub

If you think the world is running on monopoly money, which it is, then cash is trash. Governments are printing like crazy, the money supply is growing like crazy and governments are spending like crazy. Gold is one of the few things that makes any sense in these conditions. There is still alot value out there in some beaten down stuff I think. The gains in tech have pulled most of the weight in the index, its not cheap.

In 1980 the price of gold averaged $750, and in 1995 it averaged $380. There was a lot of inflation between 1980 and 1995. Today it is trading at $1900. A $100,000 in gold bought in 1980 is worth about $250,000 today, about $500,000 if you had bought in 1995. Much better than leaving the money in a Coffee can but no where near what it would be worth if you had put it into the market. Gold is denominated in dollars, massive inflation due to printing too much money would not be offset by the increase in the value of gold and the price of gold has never shown a strong correlation to inflation. If your currency is showing massive drops in value due to rampant inflation your only protection is to be holding a currency that is not suffering the same fate. Prime example is the South African Rand. Twenty years ago it traded on par with the U.S. dollar, it now trades at 15 Rand to the U.S. dollar. In the current environment Euros or the Yen would be my pick and top notch stocks denominated in Euros would be even better.

[CaptainJ]

Is anyone buying bitcoin yet?


Sent from my iPhone using Tapatalk

[Glion]

Well as long as my blue chips keep paying dividends and reinvesting I am not following to much. RBC has been money for me.

[bdub]

Originally Posted by Dean2

In 1980 the price of gold averaged $750, and in 1995 it averaged $380. There was a lot of inflation between 1980 and 1995. Today it is trading at $1900. A $100,000 in gold bought in 1980 is worth about $250,000 today, about $500,000 if you had bought in 1995. Much better than leaving the money in a Coffee can but no where near what it would be worth if you had put it into the market. Gold is denominated in dollars, massive inflation due to printing too much money would not be offset by the increase in the value of gold and the price of gold has never shown a strong correlation to inflation. If your currency is showing massive drops in value due to rampant inflation your only protection is to be holding a currency that is not suffering the same fate. Prime example is the South African Rand. Twenty years ago it traded on par with the U.S. dollar, it now trades at 15 Rand to the U.S. dollar. In the current environment Euros or the Yen would be my pick and top notch stocks denominated in Euros would be even better.

Dean, you need to look at the time frame. You can change the time frame on any asset and come up with periods where they outperform or underperform on a comparative basis. Cherry picking the short and intermediate time frame for gold shows that gold has outperformed stocks and bonds for years now. Not only that, it has reduced portfolio volatility by a large degree, makes a huge difference. Increased returns and lowered risk. Crunch the data, I’m not BSing ya.

[bdub]

Originally Posted by CaptainJ

Is anyone buying bitcoin yet?


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Im starting to change my mind on it. I’ll be watching the etf when/if it comes out next year.

[CaptainJ]

Originally Posted by bdub

Im starting to change my mind on it. I’ll be watching the etf when/if it comes out next year.

Most people won’t be getting involved until it crosses $20k usd


Sent from my iPhone using Tapatalk

[Dean2]

Originally Posted by bdub

Dean, you need to look at the time frame. You can change the time frame on any asset and come up with periods where they outperform or underperform on a comparative basis. Cherry picking the short and intermediate time frame for gold shows that gold has outperformed stocks and bonds for years now. Not only that, it has reduced portfolio volatility by a large degree, makes a huge difference. Increased returns and lowered risk. Crunch the data, I’m not BSing ya.

All I did was pick the same two time frames I had used above with the RBC and Scotia bank examples. I was not trying to cherry pick at all. You can crunch all the numbers you like but there is no way that $100,000 in gold bought anywhere, at any time, after 1980 will have turned into $6.5 million dollars and $325,000 a year in Dividends like the RBC shares did or even the $1.5 million and $75,000 a year that Scotia yielded. Only way to get even close would to have bought gold when it was $35 an ounce and it hasn't been that low since 1971. If you look at the price charts below I have no idea how anyone can come to the conclusion that gold is less volatile than the blue chip bank stocks.

I don't think you are trying to BS anyone, I think I know/understand you better than that from the posts I have read but I think you also missed the far more important point that gold does not correlate to inflation or currency devaluation unless you can sell it outside your home market into one with a currency that is not being devalued.

[bdub]

Originally Posted by CaptainJ

Most people won’t be getting involved until it crosses $20k usd


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It strikes me as something that can go from 20k to 200k or from the 20k to zero. I don’t know. Make 1000% or loose 100%. Might be worth taking a small stab at it. How much up or downside are insider people thinking about? I did see one company in the US put a good portion of there assets into Bitcoin. Its getting mote mainstream. I worry about regulatory risk with it. I think thats the big one that could send it to zero.

[Sundancefisher]

Originally Posted by Dean2

.

Dean

My bet is the current stock rise was too much too fast and mostly based upon Biden and the potential easing of world trade wars.

My gut says Covid shut downs both in North America and Europe will cause another significant market constriction. The question is how big. I’m thinking potentially 5-10% but maybe as much as 15%.

Many sectors have been hit hard as have spending and work habits.

How quickly can and if people will return to post Covid norms is the big question.

[Dean2]

Originally Posted by CaptainJ

Is anyone buying bitcoin yet?


Sent from my iPhone using Tapatalk

I won't touch Bitcoin until it is in a firmly regulated market. Right now you have no way of knowing if the Bitcoin you are buying even actually exists, and even if it is real what could happen to it under regulation. Right now you are playing Roulette and the house has all the advantage. If you treat it like gambling fine, but it sure as hell isn't investing.

[bdub]

Dean I have to correct you on one point first. I did not say gold was more or less volatile than stocks. I said that having it in the portfolio reduces portfolio volatility. Holding less than perfectly correlated assets does that. It reduces my risk. Combine that with a period where the asset outperforms and you get higher returns and less volatility. We’ve had probably 18 years where that has been the case for having some gold in a portfolio.

The second point you continue to mention is the performance of the banks. Comparing Canadian bank stocks like they are the only asset in your portfolio is cherry picking the best class of stock. Like buying Berkshire back then. What other stocks have done better than Canadian banks? Darn few. Your comparisons would be more valid if you used a stock market index as a comparison.

[bdub]

I’m also not following your point on the correlation of gold and currency devaluation or inflation Dean. You got to explain that a bit better for me.

I know can sell the gold I bought 2 years ago or so for 50 or 60% more today. Done well in either Canadian peso or USD.

[Dean2]

Bdub


I will never agree that a market index is a good measure. I also don't agree that a market weight ETF is a good idea. Since you brought up the strong performance of the Canadian Banks, lets talk about the Bank ETFs where you get ALL of the Canadian banks at their relative market weights. That means you get the two best performing banks, RBC and TD and the other bag of laggards along with them. I think I clearly demonstrated the difference between holding the best in class stock RBC, versus BNS and BNS isn't even the worst performing Canadian Bank, Laurentian is.

I also do not believe in wide diversification across a whole bunch of industries. Buy the very best one or two long term performers, that pay growing dividends in boring industries that do not require massive innovation to stay at the top of the pile. Banks, Utilities, Consumer Staples, REITS and the like. Have some diversification into key countries like the U.S., Germany and England, some Australia. Avoid China, Japan, India and all the other touted but poorly regulated or long term under performing markets. A percentage in strip bonds, when they actually had a yield and also have diversification into hard assets like revenue generating real estate.

Wide diversification in the stock market has been heavily sold as a way to limit volatility, in reality, what a wide diversification actually does is materially reduce your long term returns. I want stocks the show a long steady rise over decades, like Coca Cola, not ones like Cannabis and mining stocks that go up and down like the brides pyjamas, or worse yet go completely broke like Kodak.

I know mine is not a common view of investing and I am okay with that. It does not mean others should not invest in the way they are comfortable, just don't ask me to say that I agree or think it is the right way to do it. There are many, many ways to skin the Cat but I will always stick to the method that has worked well for me.

[ward]

Originally Posted by Dean2

Bdub


I will never agree that a market index is a good measure. I also don't agree that a market weight ETF is a good idea. Since you brought up the strong performance of the Canadian Banks, lets talk about the Bank ETFs where you get ALL of the Canadian banks at their relative market weights. That means you get the two best performing banks, RBC and TD and the other bag of laggards along with them. I think I clearly demonstrated the difference between holding the best in class stock RBC, versus BNS and BNS isn't even the worst performing Canadian Bank, Laurentian is.

I also do not believe in wide diversification across a whole bunch of industries. Buy the very best one or two long term performers, that pay growing dividends in boring industries that do not require massive innovation to stay at the top of the pile. Banks, Utilities, Consumer Staples, REITS and the like. Have some diversification into key countries like the U.S., Germany and England, some Australia. Avoid China, Japan, India and all the other touted but poorly regulated or long term under performing markets. A percentage in strip bonds, when they actually had a yield and also have diversification into hard assets like revenue generating real estate.

Wide diversification in the stock market has been heavily sold as a way to limit volatility, in reality, what a wide diversification actually does is materially reduce your long term returns. I want stocks the show a long steady rise over decades, like Coca Cola, not ones like Cannabis and mining stocks that go up and down like the brides pyjamas, or worse yet go completely broke like Kodak.

I know mine is not a common view of investing and I am okay with that. It does not mean others should not invest in the way they are comfortable, just don't ask me to say that I agree or think it is the right way to do it. There are many, many ways to skin the Cat but I will always stick to the method that has worked well for me.

I don’t think you possess a totally uncommon view either.

[bdub]

Dean. So back in the 80’s did you know which bank stock was going to outperform, or which utility or telco? Did you know which industries were going to outperform? And how did you know?

To the vast majority of investors without perfect foresight, holding a portion of gold in your portfolio would have been the right move, for a while, on a return and risk adjusted basis. I don’t expect thats going to change for a while but we’ll see. That’s all I am trying to point out. Returns wise its done better than stocks and bonds over a fairly long period. Not better than every cherry picked stock or stocks. But most.

[Twisted Canuck]

Originally Posted by ward

I don’t think you possess a totally uncommon view either.

I have the same view as Dean, and a portfolio that reflects that. Investing, not speculating.

[bdub]

Originally Posted by ward

I don’t think you possess a totally uncommon view either.

It’s not an uncommon view, it’s the consensus view. Most retail investors don’t pay enough attention to asset allocation. They are over exposed to stocks, under exposed to bonds and grossly underexposed to other assets. They are taking on more risk than they realize for the return. Retail investors as a whole are always getting the short end, always further out on the risk curve. Holding dividend payers, or banks or whatever stock class is no guarantee of roses ahead. If we see rising rates, inflation ahead, prepare for some so called safe plays to get slaughtered. I’m very defensive in my equities right now but I am prepared to change when its time to change.

[Dean2]

Originally Posted by bdub

Dean. So back in the 80’s did you know which bank stock was going to outperform, or which utility or telco? Did you know which industries were going to outperform? And how did you know?


To the vast majority of investors without perfect foresight, holding a portion of gold in your portfolio would have been the right move, for a while, on a return and risk adjusted basis. I don’t expect thats going to change for a while but we’ll see. That’s all I am trying to point out. Returns wise its done better than stocks and bonds over a fairly long period. Not better than every cherry picked stock or stocks. But most.

I got into the market in 1981. The first share I ever bought was Royal Bank, the next TD. I had them on a drip and bought more of each as I could afford them. That was also when I started working in Banking, first job was with BMO. Even back in the 80s it was very clear who the best two run banks were in Canada, and that has never changed. It also didn't take me long to move from the BMO to RBC to work for the best. CIBC you bought when they imploded, sold when they doubled or at 24 months whichever came first, because that was just ahead of the next implosion. I have never owned Bank of Montreal, tells you what I learned working for them for 14 months, CWB, Laurentian and have traded in and out of CIBC, Scotia and National. The next asset class I bought were 20-50 year Provincial strip bonds when they were yielding 13-18%. I also bought Canada savings bonds when they were paying 15 to 20%. Then I started buying investment real estate followed by U.S. stocks.

In today's world stocks account for about 40% and 12 stocks covering banking 2, utilities 4, pipelines 4 and telecom 2, would cover 70% of that total, remaining long strips 10%, cash 10% and the rest, 40%, in real estate. Like I said, not the commonly recommended 3% max in a whole bunch of different pots.

So yes, even back then I studied hard so I knew what the best companies in each asset class were, and along the way if the best company faltered and a new one took the lead, I switched horses. It was also very clear back then what the least risky, long term steady performing asset classes were. Over the years I occasionally succumbed to the temptation to dip my toe into the hot and new but not often and only once with a good outcome that did not come close to outweighing the ones that didn't work out. It pees me off to this day that I fell for the hype.


It really isn't near as hard as so many make it out to be.


https://www.thebalance.com/the-relat...-dollar-808978

This is what I was talking about with Gold not being tied to inflation and not being a hedge against rapid devaluation of the U.S. dollar, or ours unless the U.S. dollar stays strong.

[KinAlberta]

Originally Posted by bdub

If you think the world is running on monopoly money, which it is, then cash is trash. Governments are printing like crazy, the money supply is growing like crazy and governments are spending like crazy. Gold is one of the few things that makes any sense in these conditions. There is still alot value out there in some beaten down stuff I think. The gains in tech have pulled most of the weight in the index, its not cheap.

I bought some gold in the late 1970s and still have it. It wasn’t my smartest move. Have since on a couple occasions bought gold miners. They are generally really good at transferring shareholder wealth to executive wealth.

As for money supply, it has been rising for decades. Everything adjusts accordingly just not smoothly or consistently. (I have a large number of investment/financial books including a whole collection of doom-and-gloom or this-or-that-is-going-to-the-sky books. They are great to look back on to see where their extremist predictions almost universally failed miserably.)

[bdub]

Originally Posted by KinAlberta

I bought some gold in the late 1970s and still have it. It wasn’t my smartest move. Have since on a couple occasions bought gold miners. They are generally really good at transferring shareholder wealth to executive wealth.

As for money supply, it has been rising for decades. Everything adjusts accordingly just not smoothly or consistently. (I have a large number of investment/financial books including a whole collection of doom-and-gloom or this-or-that-is-going-to-the-sky books. They are great to look back on to see where their extremist predictions almost universally failed miserably.)

Of course the money supply has been growing for decades. Nothing new or unusual with that. 2-5% is typical for m1+ and m1++. We have growth rates in m1+ and m1++ of 26% and 22% right now in Canada. 13% in m2++. I wonder what the implications will be for such high rates of growth in the money supply compared to growth in the economy. Makes me go hmm.

I got back into gold in 2018 after a long absence. It was a great move. There will come a day when I’ll get out. I’m not married to it and its not my only asset. Its got its place right now though. We’re up a couple hundred percent on a couple of our gold companies in the same time period. I’m not married to them either.

[Fisherdan]

Originally Posted by Sundancefisher

Dean

My bet is the current stock rise was too much too fast and mostly based upon Biden and the potential easing of world trade wars.

My gut says Covid shut downs both in North America and Europe will cause another significant market constriction. The question is how big. I’m thinking potentially 5-10% but maybe as much as 15%.

Many sectors have been hit hard as have spending and work habits.

How quickly can and if people will return to post Covid norms is the big question.

I’m wondering about that too. The COVID numbers are really starting to fire up, and we’re not even halfway through November. How can it not affect the economy and markets? That being said, so far I’ve been wrong about pretty much everything regarding markets. And maybe even slightly linking the economy to the stock markets is folly.

[Austin]

Originally Posted by CaptainJ

Is anyone buying bitcoin yet?


Sent from my iPhone using Tapatalk

I just opened up a BTC and ETH account (Wealthsimple app) - waiting for funds to transfer. Looking to set up 1-2% of my total portfolio in here as a hedge and see how it goes. Was told if crypto dropped to the 10k-14k levels again to load up

payables solutions like Square (maybe PayPal) are offering as a service option now.

[Jim Blake]

Land and proving up gravel deposits have been the best investment I have made.

[KinAlberta]

Originally Posted by bdub

Of course the money supply has been growing for decades. Nothing new or unusual with that. 2-5% is typical for m1+ and m1++. We have growth rates in m1+ and m1++ of 26% and 22% right now in Canada. 13% in m2++. I wonder what the implications will be for such high rates of growth in the money supply compared to growth in the economy. Makes me go hmm.

I got back into gold in 2018 after a long absence. It was a great move. There will come a day when I’ll get out. I’m not married to it and its not my only asset. Its got its place right now though. We’re up a couple hundred percent on a couple of our gold companies in the same time period. I’m not married to them either.

Yeah I think that many doom and gloomers are born pessimists holding gold for an inevitable crisis (a fairly high probability event) and they will inevitably hold it right through all crises thinking that every crisis will only get worse (lower probability event).

[Trochu]

Originally Posted by Dean2

I also do not believe in wide diversification across a whole bunch of industries.

I'm with you there, my big three are KO, TD, and F. Thinking of getting into a grocer, Costco, and utility, Telus or Fortis, but haven't done so yet, and thats it.

[ehrgeiz]

Originally Posted by Dean2

I won't touch Bitcoin until it is in a firmly regulated market. Right now you have no way of knowing if the Bitcoin you are buying even actually exists, and even if it is real what could happen to it under regulation. Right now you are playing Roulette and the house has all the advantage. If you treat it like gambling fine, but it sure as hell isn't investing.

Granted you may have a great understanding of markets and traditional investments, but not so with Bitcoin. I absolutely know the Bitcoin I’ve purchased is mine and it’s relatively easy to tell. Bitcoin shouldn’t and most likely can’t be regulated. There is no house. There are whales, but the only form of manipulation is through participation.