Financial Markets Meltdown

[Dean2]

Got some PMs from guys about the buy and hold strategy of investing. I am a fan of it, particularly if your investments are in an account where your dividend and capital gains is fully taxable as it is received. That said, you have to make sure you are buying and holding the right stocks. You can't just do this with every stock, even large blue chip companies and expect good results.

If you had bought $10,000 worth of RBC in 1995, it would be worth $640,000 today if you had reinvested the dividends. You would also be collecting $26,000 in dividend income a year, which is 260% of your original investment. If it had been in Bank of Nova Scotia it would only be $181,000 whereas TD would be $580,000. If you had done the same thing with Manulife it would be worth 60,000 today. You would have done far better in GICs over that 35 year period. General Electric is even worse, it is at $34,000 today. So this also illustrates the problem with ETFs. If you bought a market weight Canadian Banks ETF you get the laggards like CIBC, Scotia, Laurentian, CWB and BMO along with the premium performers like TD and RBC. So as long as you know to buy and hold the high performers you are golden, if you don't know which two or three to pick in an industry then you are better off with the ETF.

If you had done that with Microsoft, as of 2014 it would still have only been worth 50,000, however from 2014 to today that $50,000 has grown rapidly so it is now worth $470,000.

A buy and hold strategy is a whole lot more complicated than just buying a stock and sitting on it. You really do have to be holding the right stocks over the right length of time for that system to work.

[bdub]

Originally Posted by Dean2

NO historical measure, growth, Beta, Alpha etc. predicts future behaviour. Yes there are events that can make a low Beta stock into a high Beta stock, and yes a real low Beta may just be an indication that the stock hasn't done anything for a long time. All that said, if you go into a major correction with a 2.0 Beta portfolio you are going to be one really unhappy camper because the Beta isn't likely to get better through the drop.

Guy can't look at just one or even a few variables to decide what a prudent portfolio construction is. If it was simple anyone could do it, and from long experience I can guarantee there are a lot less people good at it than bad at it. I can also guarantee that many of the so called professionals are almost as bad as the amateurs. Finding a really good advisor is like finding a B&C 200 point Typical Whitetail.

Not wanting to argue with you. All I am trying to point out is that on average, unless you are an index investor, you are going to find that your portfolio has fallen more than the market if you are fully invested only in stocks.

[Dean2]

Originally Posted by bdub

Not wanting to argue with you. All I am trying to point out is that on average, unless you are an index investor, you are going to find that your portfolio has fallen more than the market if you are fully invested only in stocks.

Did not mean to sound like I was arguing. I respect what you have to say and your knowledge. To me it was just a discussion of the various things one has to consider. Your point is well made, many portfolios will swing more than the index, what I was attempting to illustrate is those types of portfolios need to be looked at and balance which is a really long and complicated discussion. All good by me.

[GoFlames]

edit

[pikeman06]

Buy and hold is fine if you bought 20 years ago....of course it's payed out in the long run. If you bought overpriced stock or I should say overVALUED stock it's a different story. If you recently bought in say for a dividend stock on a company that just had a 20 percent run because their dividend was attractive to the blind eye but really never had a profit or did anything physical to bolster the price of a share, those ones you better dump, theres lots out there tanking that won't bounce back because it was just a dividend thing that boosted the share price. Because the gic and rrsp interest was so low people went tfsa and dividend shares. That dividend will drop next quarter triggering further sell offs.

[bdub]

Just breezing through the news this AM to get a feel for the market narrative for the coming week. Here's a few good ones.

"Market panic over the fast-spreading new coronavirus is uncalled for, the World Health Organization’s director-general said Sunday..."
Now the WHO is worried about the markets? I thought their expertise was world health issues.

"China: Manufacturing PMI will shock the market on Monday
China's manufacturing PMI has plunged to a level worse than that reached during the global financial crisis..."
Obvious.

"A $30 Oil Price Is the Real Virus Threat to OPEC
The oil cartel and its international partners will undoubtedly agree to productions cuts this week. But will they be big enough?"
Probably not.

"The Kuwaiti stock market dropped by 10.98 percent in the first 30 minutes of trading on Sunday morning as investors responded to the spread of the coronavirus across the Arabian Gulf..."
Ouch, what the headline doesn't say is they had to call a trading halt, think the Toronto market last week.

"The worry is that the market rout will turn into a credit crunch. If that looks likely, policymakers need to show they are ready to take decisive action..."
Yup, a crapload of debt out there. Hard to pay the bills when nobodies working.

And for all the Catholics out there you can take comfort in this one...

"Coughing pope cancels trip, but it’s just a cold, not coronavirus"
Must come a relief to all the people he shook hands with and the parents of baby's he's kissed over the last 2-3 weeks.

I'm thinking it's going to be another crazy week.

[bdub]

Originally Posted by Dean2

Did not mean to sound like I was arguing. I respect what you have to say and your knowledge. To me it was just a discussion of the various things one has to consider. Your point is well made, many portfolios will swing more than the index, what I was attempting to illustrate is those types of portfolios need to be looked at and balance which is a really long and complicated discussion. All good by me.

No worries, yes that is a long discussion.

[elkhunter11]

Originally Posted by bdub

Just breezing through the news this AM to get a feel for the market narrative for the coming week. Here's a few good ones.

"Market panic over the fast-spreading new coronavirus is uncalled for, the World Health Organization’s director-general said Sunday..."
Now the WHO is worried about the markets? I thought their expertise was world health issues.

"China: Manufacturing PMI will shock the market on Monday
China's manufacturing PMI has plunged to a level worse than that reached during the global financial crisis..."
Obvious.

"A $30 Oil Price Is the Real Virus Threat to OPEC
The oil cartel and its international partners will undoubtedly agree to productions cuts this week. But will they be big enough?"
Probably not.

"The Kuwaiti stock market dropped by 10.98 percent in the first 30 minutes of trading on Sunday morning as investors responded to the spread of the coronavirus across the Arabian Gulf..."
Ouch, what the headline doesn't say is they had to call a trading halt, think the Toronto market last week.

"The worry is that the market rout will turn into a credit crunch. If that looks likely, policymakers need to show they are ready to take decisive action..."
Yup, a crapload of debt out there. Hard to pay the bills when nobodies working.

And for all the Catholics out there you can take comfort in this one...

"Coughing pope cancels trip, but it’s just a cold, not coronavirus"
Must come a relief to all the people he shook hands with and the parents of baby's he's kissed over the last 2-3 weeks.

I'm thinking it's going to be another crazy week.

I expect another crazy week or two, a continued decline , but with some people easing back into the markets, causing some bounces. I am expecting to be sitting on the sidelines for a while yet.

[rubiconman]

buy buy buy!!

[Justfishin73]

Originally Posted by rubiconman

buy buy buy!!

Um,hell no.

[58thecat]

Originally Posted by Justfishin73

Um,hell no.

Why not?

I have always taken advantage of this type of situation and done well....if an apple was worth a buck yesterday but went down to a dime and you usually spend five bucks a month on apples seems your gonna get a heck of a lot more and when they increase in price you sell them to your neighbour who is dying for an apple in which you pocket the extra cash.....

[CMichaud]

According to Rabbi Lisa Rubin, “King Solomon was trying to humble his wisest servant, so he asked him to perform a seemingly impossible task: to find something that did not exist.

He requested a magic ring — one that, if a sad man wore it, he would become happy and if a happy man wore it, he would become sad.”

The story suggests that the servant could not find anything of such nature. So, King Solomon decided upon himself to go to a jeweler and design a ring with the inscription in Hebrew saying, “Gam ze ya’avor,” which means, “This, too, shall pass.”

[elkhunter11]

Originally Posted by 58thecat

Why not?

I have always taken advantage of this type of situation and done well....if an apple was worth a buck yesterday but went down to a dime and you usually spend five bucks a month on apples seems your gonna get a heck of a lot more and when they increase in price you sell them to your neighbour who is dying for an apple in which you pocket the extra cash.....

Why would I buy apples that went down a dime today, when I am thinking that will be be down fifteen or twenty cents in the very near future? I would rather wait , and buy them for even less, with the potential to make much more.

[Scott h]

Originally Posted by elkhunter11

Why would I buy apples that went down a dime today, when I am thinking that will be be down fifteen or twenty cents in the very near future? I would rather wait , and buy them for even less, with the potential to make much more.

I'm thinking those apples are going to be on sale for a long, long time......

[Map Maker]

Originally Posted by CMichaud

According to Rabbi Lisa Rubin, “King Solomon was trying to humble his wisest servant, so he asked him to perform a seemingly impossible task: to find something that did not exist.

He requested a magic ring — one that, if a sad man wore it, he would become happy and if a happy man wore it, he would become sad.”

The story suggests that the servant could not find anything of such nature. So, King Solomon decided upon himself to go to a jeweler and design a ring with the inscription in Hebrew saying, “Gam ze ya’avor,” which means, “This, too, shall pass.”

^Damn Good!

[Justfishin73]

Originally Posted by elkhunter11

Why would I buy apples that went down a dime today, when I am thinking that will be be down fifteen or twenty cents in the very near future? I would rather wait , and buy them for even less, with the potential to make much more.

Think you and I may be some of the very few here who think alike. I'm not doing anything until I see a sustained uptick in the markets.

[elkhunter11]

Originally Posted by Justfishin73

Think you and I may be some of the very few here who think alike. I'm not doing anything until I see a sustained uptick in the markets.

If it goes down 20%, I can afford to let it gain back 5% , before getting back in, and likely still make a profit for 2020.

[58thecat]

Originally Posted by elkhunter11

Why would I buy apples that went down a dime today, when I am thinking that will be be down fifteen or twenty cents in the very near future? I would rather wait , and buy them for even less, with the potential to make much more.

and that is how we or some have done well financially....take a risk...slight gamble...a hunch...watch...get a feel...make a move....10k investment in the 90's turns into 600-800k now but along the way it took a few dips....that when you buy more...don't take my advice though....ya might blow it all on red and a roll of the wheel.

[elkhunter11]

Originally Posted by 58thecat

and that is how we or some have done well financially....take a risk...slight gamble...a hunch...watch...get a feel...make a move....10k investment in the 90's turns into 600-800k now but along the way it took a few dips....that when you buy more...don't take my advice though....ya might blow it all on red and a roll of the wheel.

I have been playing the markets for over 20 years, and I have done fairly well over that time period , by playing better odds, not by playing low odds. If I was gambling with 10k, I might do things a little differently, but when playing with several hundred thousand , you are about the last one that I would take advice from

[KinAlberta]

Since this was month end and funds will report their closing values I’m curious how the coming days turn out. Points on an index are one thing but drops in actual dollars in people’s accounts is a good test their nerve.

Also, we’re approaching a fiscal qtr end so fund managers will be facing performance reviews. If March doesn’t recover but instead washes out, they may start sweating over how to keep their jobs. (I wonder if this is when dumb risks are taken.)

[Justfishin73]

Futures looking ugly, the short covering fake last minute
Friday may have fooled some people.....word is US to cut rates by 50 bps, think we will be doing at least 25 bps on Wednesday. Not sure that will stop the blood in the streets though.......

[Twisted Canuck]

Originally Posted by Justfishin73

Futures looking ugly, the short covering fake last minute
Friday may have fooled some people.....word is US to cut rates by 50 bps, think we will be doing at least 25 bps on Wednesday. Not sure that will stop the blood in the streets though.......

The problem with cuts is, they don't have much room left to cut. And if the markets keep falling, they have used their only tool in the box. Then what?

Damn grim.

[LJalberta]

Originally Posted by Dean2

Got some PMs from guys about the buy and hold strategy of investing. I am a fan of it, particularly if your investments are in an account where your dividend and capital gains is fully taxable as it is received. That said, you have to make sure you are buying and holding the right stocks. You can't just do this with every stock, even large blue chip companies and expect good results.

If you had bought $10,000 worth of RBC in 1995, it would be worth $640,000 today if you had reinvested the dividends. You would also be collecting $26,000 in dividend income a year, which is 260% of your original investment. If it had been in Bank of Nova Scotia it would only be $181,000 whereas TD would be $580,000. If you had done the same thing with Manulife it would be worth 60,000 today. You would have done far better in GICs over that 35 year period. General Electric is even worse, it is at $34,000 today. So this also illustrates the problem with ETFs. If you bought a market weight Canadian Banks ETF you get the laggards like CIBC, Scotia, Laurentian, CWB and BMO along with the premium performers like TD and RBC. So as long as you know to buy and hold the high performers you are golden, if you don't know which two or three to pick in an industry then you are better off with the ETF.

If you had done that with Microsoft, as of 2014 it would still have only been worth 50,000, however from 2014 to today that $50,000 has grown rapidly so it is now worth $470,000.

A buy and hold strategy is a whole lot more complicated than just buying a stock and sitting on it. You really do have to be holding the right stocks over the right length of time for that system to work.

For any wanting more info on the 'buy and hold' strategy, I would suggest a good place to start is the BogleHead forum. https://bogleheads.org. Named after the late Jack Bogle, of whom Warren Buffet said, "If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle."

Most guys can never beat the market consistently or long term, so ETF's are a great way to go.

[Scott h]

Originally Posted by LJalberta

For any wanting more info on the 'buy and hold' strategy, I would suggest a good place to start is the BogleHead forum. https://bogleheads.org. Named after the late Jack Bogle, of whom Warren Buffet said, "If a statue is ever erected to honor the person who has done the most for American investors, the hands down choice should be Jack Bogle."

Most guys can never beat the market consistently or long term, so ETF's are a great way to go.

I definitely fall into the Buffet "buy and hold" category. I know myself well enough that I don't have the patience or interest to buy and sell. I'm diversified on my income streams enough that if I take a 40% hit on investments or/and the cash rate goes to zero I'm not going to lose any sleep.

[58thecat]

Originally Posted by elkhunter11

I have been playing the markets for over 20 years, and I have done fairly well over that time period , by playing better odds, not by playing low odds. If I was gambling with 10k, I might do things a little differently, but when playing with several hundred thousand , you are about the last one that I would take advice from

I give no advice to no one when it comes to investments....glad to hear I am about the last one for you to take advice from but that indicates you would listen to another fool.....

Good luck.

[elkhunter11]

Originally Posted by 58thecat

I give no advice to no one when it comes to investments....glad to hear I am about the last one for you to take advice from but that indicates you would listen to another fool.....

Good luck.

No, I am not about to listen to you, or any other fool, when it comes to investing my money.

[bdub]

Originally Posted by Scott h

I definitely fall into the Buffet "buy and hold" category.

That's a common misconception on Warren Buffet and Berkshire's strategy. His message to investors is they are better off to by a broad market index fund and stick it out if they don't/can't do the hard work of making investment decisions. Buffet is always adjusting his portfolio, adding and selling and even eliminating entire positions. Right now Berkshire is sitting on about 130 billion in cash, 25% ish.

https://www.dataroma.com/m/holdings.php?m=BRK

[Justfishin73]

Originally Posted by Scott h

I definitely fall into the Buffet "buy and hold" category. I know myself well enough that I don't have the patience or interest to buy and sell. I'm diversified on my income streams enough that if I take a 40% hit on investments or/and the cash rate goes to zero I'm not going to lose any sleep.

Well, you must have a tiny portfolio or nads of steel. 40% loss would not make me happy.

[LJalberta]

Originally Posted by bdub

That's a common misconception on Warren Buffet and Berkshire's strategy. His message to investors is they are better off to by a broad market index fund and stick it out if they don't/can't do the hard work of making investment decisions. Buffet is always adjusting his portfolio, adding and selling and even eliminating entire positions. Right now Berkshire is sitting on about 130 billion in cash, 25% ish.

https://www.dataroma.com/m/holdings.php?m=BRK

Of course he also says that almost no professional fund manager will beat the indexes in the long run, and that it's not a matter of not doing the 'hard work' of making investment decisions. It's the fact that to actually beat the markets you'll be a statistical anomaly. It's rare professional fund managers do it, and even more rare the average joe will do it. Of course someone's gotta be exception.

[KinAlberta]

Governments and central banks to the rescue (here come the bailouts aka market stabilization, driving down interest rates, buying crap paper from banks, fiscal stimulus, debt spending...)

Asian stocks rise as central banks pledge action - BBC News

“ "The BOJ will monitor developments carefully, and strive to stabilise markets and offer sufficient liquidity via market operations and asset purchases," he added.”

https://www.bbc.com/news/business-51700935