[londoncalling]

Most homebuyers (especially new buyers) will have very little knowledge of how changes in interest rates actually impact affordability. they rely on their bank or mortgage broker to guide them through the process. Unfortunately, their desire to own will override sound financial decisions as well as FOMO. They will be told to get their mortgage before rates jump again over the next x years. They will be given a mortgage with a longer term and feel safe knowing their payment is X dollars biweekly. The real shock will come when it is time to renew if the rates have gone up significantly more than their wages. That is when we will see things unravel. warnings of this have been continuous since the 08 crisis in the US and yet we continue to keep rolling along. Thanks GL for the reminder! I could have taken a lesser aggressive mortgage repayment strat and dumped my money in the market. I certainly would have a larger portfolio had I done so. Should rates rise considerably I can lock in and lower the rate. That is the beauty of having 0 consumer debt and a great credit rating. sometimes it's about risk mitigation and being able to sleep at night, instead of knocking it out of the park each year. some would argue I could have cashed out those returns and killed the mortgage. Unfortunately, I would not have know when to leave the casino. Instead I will stay and play with money I can lose.

 

[londoncalling]

I decided to take a different view on the home ownership/ renter discussion taking place. Try to put it in the context of those that do a a proper analysis of buying a rental and doing a cost analysis on cash flow. I have seen this discussed on several real estate threads here and elsewhere. Some do this with their other investments as well. If we factor out the non financial considerations (a home not an investment, preferring a certain location over another despite it being not as beneficial financially etc.) each property would provide a different cash flow percentage. Some owners will foolishly own property that provides negative cashflow with the speculation that the property will appreciate enough to compensate for that loss. If a tenant is able to find such a place it definitely would be cheaper than owning. Many landlords forget to include the time cost of being a landlord which is what I believe Keith is alluding to above. It is difficult to calculate the cost of one's time if it is not their regular job that their time is being allocated to. If I make $100 an hour at my place of employment does that mean an hour spent elsewhere is $100 as well? One typically prices it at what it would cost to have another person do that same task.

 

[londoncalling]

Not a lot of bonds in our portfolio, but the dividends and distributions were unaffected so no concern. The pullback has been a good opportunity to deploy some spare cash. Some great dividend increases this week as well.

Did you find some deals?

 

[londoncalling]

Not me. No bond ,not diversified and not too concern

But you did find a buyer for some TD shares.

 

[londoncalling]

Could someone tell me - has there ever been a market crash (however that is defined, - 20% or more?) that didn't ostensibly involve some unexpected shock to the system?

We / the talking heads talk so much about P/E's too high, stocks "overbought", profit taking, put buying at record highs, central bank intervention, the smart money moving out of stocks, bull run long-in-the-tooth, bond yields rising, etc. etc., reason after reason... but has it ever happened that any of these much discussed reasons is the actual cause of bad stock performance??

It seems to me it is always something else. A liquidity crisis, a pandemic, etc. Stocks never go down just because the ought to... They only go down when there is a genuine surprise the freaks everyone out.

Stocks do go down just because they ought to. It's called reversion to the mean. At a certain point the euphoria ends and the smart money moves on which causes panic selling. Analysts, the media and individual investors like to find the trigger and sometimes it is real but the market is much bigger and more complex than that. Everyday there is news that is the "reason" the market goes up or down. The money doesn't completely disappear, It usually moves to other assets.

 

[londoncalling]

Oh ya? So when did that happen, that "smart money moving on" caused a market crash? I don't remember that one, but I'm not that old...

Reversion to the mean isn't exactly a reason is it - just a post-event statistical description of what happened...

Perhaps I didn't do a good job in clarifying my post. Stock market corrections happen when markets become severely overpriced. Mean Reversion or the smart money moving on isn't the reason and is in fact a post event description as you have indicated. If you use the 2000s tech bubble as an example, dot com stocks which had negative earnings were trading at ridiculous evaluations. For every buyer there is a seller and vice versa. Often isn't one thing that is the cause of the correction although we will try to find a single catalyst. Although the performance of the market today is certainly nowhere near crash or correction territory many will try to determine why it closed lower than it did last week. Was it Omicron? Infrastructure bill being defeated? Tax loss selling? other? To say that the market cannot be manipulated is foolish. Investment managers have thresholds which limit how much they can buy or sell at a time. Stocks can be halted by exchanges. A more recent and interesting event was the price manipulations of stocks like AMC and Gamestop. To get back to your original question about a shock to the system I would say there is always a reason attributed to the correction.

 

[londoncalling]

Nancy Pelosi is loading up with millions in GOOG, DIS, RBLX, MU options

What does she know? Lockdown 2.0? More easy money?

The proverbial sky is falling and she's betting on youtube, cartoons and video games

Be better if she was buying companies that will benefit from infrastructure spending as at least the US tax payers would get a road, a school or a hospital. Like most gifts people would prefer cash.

 

[londoncalling]

Corrections are usually good places to look at rebalancing. If nothing is too out of whack, you can wait to see if a bear market comes. Corrections are typical every 1-2 years so this one was definitely due and looks like a solid one too.

I did some portfolio shifts in December January but also reduced my cash position a bit early. This is a habit that I have developed over the years. In order to combat this I have increased my target cash weighting from 5 to 10% over the years. Always a conundrum in dealing with cash drag vs. being fully invested. Today's red in the market helps increase that cash weighting so that I can buy more and my portfolio has a higher yield as well. Being facetious with that last comment as it is total return that matters.

I am still amazed that the possibility of a .25% increase can move markets this much in the short term (perhaps 1 - 1.5% this year). Will this scare off the B of C from raising this week? I still want them to raise in January as I think longer term it is the right move. If they don't raise rates now what tools will they have to use when the next recession hits.

Like Jimmy, the dilemma now is to add or wait. I am going to spend today on the sidelines as I think there will be more panic selling leading up to Wednesday. May make a purchase or two tomorrow. I have some cash to deploy in February. Looking at adding to MFC and starting a position ATD. Would like to get into MSFT or APPL but at a price much lower than here. Same with Industrials.

 

[londoncalling]

0.25% may be nothing, but it's doubling the Policy Interest Rate, lol...

And when 10-year yields are not even at 2%, then increasing the Policy Interest Rate by only 0.25% is huge. A Policy Interest Rate rising by more than 10% of the current 10-year yield, lol...

I'm not arguing that they shouldn't raise rates, they should, I'm just pointing that with rates so low, we are in deep sh*t.

Will we ever see 10-year yields back above 5%? HAHAHAHAHA, hilarious!

The rich controls this world and won't allow such a thing to happen.

Valid point.

Are we headed into a correction, a crash or a long term recession?

In some ways the economy is doing well aside from Covid disruption. However, I think there is a lot of possibility for the smallest disruption to result in big trouble. If we look at the charts prices for most stocks are not much below where they were 6 months ago. If people are freaking out now. what happens when they get to where we were in 2020 and the BOC and FED have no room to cut. Just keep printing and let inflation run wild while wage growth (real or nominal) remain flat?

If one searches the forum they will find threads going back 5-10 years talking about NA moving to a no growth market like Japan experienced. A lot of this was due to demographics, shift in economic policy etc. A generation were unable to find good jobs, invest, buy real estate etc. and its market returned next to nothing.

 

[londoncalling]

I am trying to find if there was any rotation in the market or just a fun ride down and back up. So far looks like a brief dip across the board.

 

[londoncalling]

The question of whether or not to hold bonds or fixed income does need to be given consideration. Unlike a pension fund or an insurer, individual investors should consider the rationale for owning these tools. There are some that have amassed great fortunes in growth equities that have switch to bonds because they have enough. There are also those that need to hold bonds and fixed income to reduce volatility. I do not hold bonds personally but do through my pension funds. I guess the question remains whether bonds actually reduce portfolio volatility and what is there correlation to equities. I haven't looked to closely but I think bond etfs and bond trading do not achieve the same function as holding bonds to maturation. I do agree that they are not without risk including negative real return.

 

[londoncalling]

Where’s all cheer and joy? Everyone should enjoy reverse new highs while it lasts.

My only concern at this time surrounding the general market is we had such a large run upwards and now that it's starting to fall we could have quite a ways to go. I was content to buy during the past few months and am content to buy over the next few as well. Since I have to buy when cash hits a certain percentage of allocation I will likely be buying into this declining market. I still haven't locked in my fixed income portion as I am waiting for the June announcement and rate increases in July. I may take a chunk of that and put it into stocks if they hit bear territory. As most of the market decline has come from speculative tech I have been fairly shielded from the 50-60% declines. That being said I am looking at making a couple purchases in May. Canadian banks are starting to look attractive. RY is my lowest position of those I currently hold and may look to adding to that one. Some tech plays are starting to look like opportunities as well but are only at levels they were 2 years ago.

 

[londoncalling]

I was indeed referring to the NA markets. I would not want to see any countries exchange see the perfromance of the Nikkei 225 but it is possible for the S&P to become stagnant. Demographics play a large role in a nations growth and the US is getting old and slow. I doubt it will be the global leader it was in years past.

 

[londoncalling]

I think they will still deliver on promised hikes and QT to maintain credibility. The extent of which may be muted if we see inflation wane and the market fall. My fear is that they cannot curb inflation as some profess the major causes are beyond the Fed (and BoC)'s reach. If that occurs we may see a a major collapse akin to 2008 or worse. A sharp crash and reversal would be better than a decade of slow decline. I think it would shake out a lot of non investors. I can't predict the future so I just hold my nose and try to steer into the skid. I placed some orders on a:beautiful reverse high day such as this. My portfolio was down just under .5% today. VEQT 1.25% Tomorrow it could be the inverse. I am not ecstatic about the YTD returns but understand that 10 and 20 percent declines are normal market action.

 

[londoncalling]

They are already starting to hint at lesser increases going forward and inflation is nowhere near target. I guess CPI is not an issue if you don't need to use transportation, eat, or have a roof over your head. Keeping things will require some nimble moves but I think it is doable. I don't expect the FED and BoC to be so forward in hinting where rates are headed as they were with the most recent announcements. If they are unable to curb inflation it will be tempered by changes in consumer behaviour. Perhaps people will realize that certain produce is just not affordable at certain times of the year. Eating more locally and seasonally may return if it is the more affordable option. New phone and car every year or two? Not a necessity. Inflation has been hurting the poor for quite some time but now the middle class is aware that this may affect them too. Will this impact business? Absolutely. I think the more immediate threat is escalating input costs. I truly hope the bulk of inflation will dissipate when the transitory supply chain issues are resolved. end rant

 

[londoncalling]

What a nice start of the day. Let’s get to five years reverse highs by fall.

Are you acting on the current market trend? By this I mean are you shorting, playing options, or buying? Not all sectors are experiencing reverse highs. In fact some are at 52 week highs. Are you rotating sectors in any way? Or are you waiting for fall or a certain percentage drop? You seem to be certain we are going to hit 5 year lows. I think the current correction is healthy to take out some of the hype, but 5 year lows would have larger impacts on the overall economy. For that reason I hope that you are wrong on your forecast. I apologize for so many questions but I am trying to understand if you have a plan as to what you will buy and when.

 

[londoncalling]

Banks have room for more decline. If one thinks rate hikes are bad for banks wait to see what foreclosures and bankruptcies do to their balance sheets. This doesn't mean we will see a RE crash. Even if we do the banks will survive but some real estate investors and home owners won't. For the most part anyone who didn't over extend or over leverage will be fine. I shudder to think what it would be like if we had high unemployment added to the current mix. Canadian banks have better regulations and loan provision than other countries. Being an oligopoly helps as well. Anyone remember the phrase "Too big to fail"? Banks will be saved come hell or high water.

I want to add to RY as it is my smallest holding of the big 5 (don't own CM) but am waiting for a better share price.

 

[londoncalling]

Volatility reigns.

 

[londoncalling]

Investment returns saw in 2021 are not typical and one should not expect similar yoy returns on a long term basis. I haven't heard much from the FIRE fanboys and girls as of late. I am not talking about semi retired, or folks like yourself @james4beach who have ran worst case scenario plans and are prepared to adjust as necessary. I am referring to those that professed you can work and save for 5-7 years and then spend the next 40 or 50 doing whatever you wish. To be honest I believe most FIRE talkers were just trying to change the definition of retirement to better address a change in work life balance. Most had side hustles or blogs or books to peddle. A lot of it was well intended fin porn. Will FIRE be sent out to pasture like the Freedom 55 marketed in the 80s? Yes it is possible to achieve Freedom 55 or FIRE but for the majority it is not feasible. I believe many FIRE folk failed in their planning by using the assumption of steady market returns(no volatility or possibility of a bear) and RE prices going to infinity. I don't blame them. Basically, from 08 onward was a pretty good run in stocks with quick rebounds and RE values saw increases typically made over years or decades on a monthly basis.