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I would guess the US would raise rates before CAD would. Which would make our dollar weaker.
I always thought that inflation was going to be the way to get rid of the impact of our pesky debt. So maybe they'll be content with a higher than normal inflation rate for a while.
 

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Real Central Bank Rates (rate minus inflation) :

US: -4.9%
Poland: -4.7%
Brazil: -4.6%
Saudi Arabia: -4.3%
Canada: -3.2%
Chile: -3.1%
Malaysia: -3.0%
Norway: -2.7%
Eurozone: -2.5%
Philippines: -2.5%
S. Korea: -2.1%
Mexico: -1.9%
UK: -1.4%
Swiss: -1.4%
Russia: -1.0%
India: -0.3%
 

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Real Central Bank Rates (rate minus inflation) :

US: -4.9%
Poland: -4.7%
Brazil: -4.6%
Saudi Arabia: -4.3%
Canada: -3.2%
Chile: -3.1%
Malaysia: -3.0%
Norway: -2.7%
Eurozone: -2.5%
Philippines: -2.5%
S. Korea: -2.1%
Mexico: -1.9%
UK: -1.4%
Swiss: -1.4%
Russia: -1.0%
India: -0.3%
Nothing to see here, move along.
 

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The whole market seems to be in a bubble. The TSX keeps going up. June is on average a down month of something like -0.4% for the S&P500.

I took advantage of BMO's commission-free ETFs and bought small quantities of VFV and XIU for my wife's TFSA.

Then the next day, I tried to top up my own RRSP and TFSA by placing limit orders based on the previous day's low to try picking them up on the volitility. But so far they have not been filled. Makes you wonder if just buying at market would be better since I want them anyways. Why waste time?
 

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Warning! To me, NASDAQ above 14,000 makes no sense! It'll go back to 13,000 at some point, mark my words.
 

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That's a 7% drop. We've been there just a few months ago when ZQQ when down 15% and I bought more.
What I believe to be a reasonable valuation for NASDAQ for EOY 2021 would be 12,000, but I won't say this because I feel like the momentum is still so strong (even with that drifting sideways YTD) that 12,000 won't happen in the next few months, but I think it's likely to drop to 13,000 in the next 6 months. We may see 12,000 in 2022, actually...
 

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Warning! To me, NASDAQ above 14,000 makes no sense! It'll go back to 13,000 at some point, mark my words.
Why does it make no sense?

Interest rates are low and will remain low for a while, inflation should be sky high and we're seeing peeks of it.
 

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Why does it make no sense?

Interest rates are low and will remain low for a while, inflation should be sky high and we're seeing peeks of it.
Pandemic or not, interest rates have been decreasing steadily following a linear trend since about 1987. Rates took a sharp drop in 2020, but they're back up to their usual linearly decreasing trend. Look at how low were the rates in 2012 and 2016. The current ECY of NASDAQ is also alarming, and that takes into account the interest rates.

Meanwhile, during that same period from 1987, NASDAQ has followed an exponential trend which has been broken in 2000 and 2008.
During the 2000 bubble, NASDAQ's volume increased sharply, setting a new level which was twice its previous volume.
Since 2000, the NASDAQ weekly volume was about 10B, until 2020, where it doubled to 20B and has kept that average volume since then, a similar pattern to the bubble of 2000.
Continuing the current momentum could be the creation of a new bubble which could last a few years of euphoria, but hopefully not, hopefully we'll just have a correction this year or next year to levels around 13,000, and ideally 12,000.

This aberration may have even started silently in 2016.

I'm talking specifically of NASDAQ, not S&P 500 which is safer at the moment.

I'd prefer picking the stocks with decent valuations inside NASDAQ than buying its index as a whole.
 

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Pandemic or not, interest rates have been decreasing steadily following a linear trend since about 1987.

I'd prefer picking the stocks with decent valuations inside NASDAQ than buying its index as a whole.
yes rates are low, and I expect they will continue to be low, and inflation will be high. I believe for that reason good companies will offer good returns.

I like picking stocks with decent valuations, and I also appreciate passive index investing. Both methods make a lot of sense to me. Active/Passive is just a philosophy, I'm bullish on stocks right now, though there is a lot of stupid crap I'm not interested in investing in.

I'm okay with holding a different opinion than "everyone" so eschewing the index in favour of individual stocks is just fine with me. But with low rates and high inflation, I think equities are the place to be.

Specifically I'm interested in infrastructure, commodities and real estate right now. I think the tech world is going to experience significant political risk going forward.
 

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yes rates are low, and I expect they will continue to be low, and inflation will be high. I believe for that reason good companies will offer good returns.

I like picking stocks with decent valuations, and I also appreciate passive index investing. Both methods make a lot of sense to me. Active/Passive is just a philosophy, I'm bullish on stocks right now, though there is a lot of stupid crap I'm not interested in investing in.

I'm okay with holding a different opinion than "everyone" so eschewing the index in favour of individual stocks is just fine with me. But with low rates and high inflation, I think equities are the place to be.

Specifically I'm interested in infrastructure, commodities and real estate right now. I think the tech world is going to experience significant political risk going forward.
I agree.

I believe that picking the right stocks, or at least the right sectors or industries will do good in any context when an active investor is skilled enough to adapt to the current context.

That's why INFL ETF is up +19% YTD. I also believe there will be inflation, but not all stocks will do great through inflation.

My warning is about NASDAQ specifically. But other strategies like yours will (may) do great in the near future.

And passive investors with a well diversified portfolio of indexes ETF and asset classes will do great in any context. (Great here means they'll continue to do the low volatility average return, which is fine as a strategy)

But as an active investor, I wouldn't buy QQQ at the moment, for instance. I'm wondering though if it'll continue its run up in the next few days as it seems like this time it truly managed to break that 14,000 while teaching new ATH which is bullish, but I'd still be cautious.
 

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I agree.

I believe that picking the right stocks, or at least the right sectors or industries will do good in any context when an active investor is skilled enough to adapt to the current context.

That's why INFL ETF is up +19% YTD. I also believe there will be inflation, but not all stocks will do great through inflation.

My warning is about NASDAQ specifically. But other strategies like yours will (may) do great in the near future.

And passive investors with a well diversified portfolio of indexes ETF and asset classes will do great in any context. (Great here means they'll continue to do the low volatility average return, which is fine as a strategy)

But as an active investor, I wouldn't buy QQQ at the moment, for instance. I'm wondering though if it'll continue its run up in the next few days as it seems like this time it truly managed to break that 14,000 while teaching new ATH which is bullish, but I'd still be cautious.
I wouldn't choose to buy QQQ because I think tech valuations are in general crazy.
However as part of a couch potato I would buy some, efficient market theory says that the market is likely mostly correct, even if they're crazy.
 

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We're about to say that NASDAQ did 2x in 2 years and 3x in 5 years. Does this make any sense?
 

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Keep this in mind.


  • The DCF model is more sensitive at lower interest rates
  • The valuation using DCF is more sensitive for growth stock than value stocks
  • The valuation using DCF is even more sensitive for hyper growth stocks
As interest rates continue its downward trend, equity valuation gets increasingly sensitive to a tiny bounce back rising rates.
 
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