Financial Markets Meltdown

[Drewski Canuck]

Originally Posted by kingrat

Oil boom? Moron says were supposed to be getting rid of oil I thought?

Moron? That P.M. Moron to you! (You see title is everything to posturing Champagne Socialists like Justin)

Drewski

[fishtank]

Any black swan events on the horizon ?? China, Taiwan , south korea election , oil huge rise, Ukraine/ Russia war spill over ?

[fishtank]

todays US news headline inflation at 40 year high … can’t wait for the 50th year announcement next month

[Dean2]

Two things - Recent RBC chart. For you technical analysis folks, typical downward price trend of lower highs, and lower lows. TD Bank is showing the same trend.



I have also had a few people PM me and ask about the Bank Bail In regulations. The short of it is, these do not apply to regular deposit clients. They apply to holders of preferred, unsecured, shares and Bank issued bonds, and even then only if they were issued AFTER the regulations came into force.

[Buckhead]

It looks like RBC has a couple levels of resistance - at $132 and again at $126.
It will be interesting to see how that plays out.

[Vantage Point]

Interesting look at CBDC { Central Bank Digital Currency } and possible ramifications.https://www.youtube.com/watch?v=R15SoEOV8XE&t=10s And we have Mark Carney possibly in the wings with his take on carbon footprint.

[fishtank]

Originally Posted by Vantage Point

Interesting look at CBDC { Central Bank Digital Currency } and possible ramifications.https://www.youtube.com/watch?v=R15SoEOV8XE&t=10s And we have Mark Carney possibly in the wings with his take on carbon footprint.

This war show how the USA still controlled and dictate the financial system … Biden put in a order for review of the crypto currency’s and a possible digital currency .

[Drewski Canuck]

The one sector that is shining for Canada, even with the Anti Business - Anti Oil crowd in Ottawa, is Agriculture.

Yes I know that there are no "farms" listed on Stock Exchanges, but there are alot of big businesses servicing the Agriculture Industry, such as Fertilizer, farm chemicals, Farm Equipment, etc.

Can anyone point me to a Mutual Fund that has a specialty in Agri Business?

The way I see it the world is hungry and will now be even more hungry because of the loss of production in Ukraine. There was an Agriculture Minister on TV for Ukraine saying that if the seeding does not start in the next month it will be the end of the whole crop year. As no one is buying Russian Grain in the West, and Russia has such poor transportation for Grain export to places like China, Syria and Iran who still do business with Russia, that now is ALOT of production off the table for the World Market.

So regardless of what Oil does, Agri Business will see alot bigger returns this year.

Drewski

[bdub]

iShares has this one. You get the good with the bad. Top 5 holdings are Deere, Nutrien, Archer Daniels, Corteva and Mosaic. Management fee is .39%.


https://www.ishares.com/us/products/...-producers-etf

[Vantage Point]

More thoughts on the Digital Currency push with Biden, Carney & ties to carbon footprint in the not too distant future ? https://www.youtube.com/watch?v=Ei8VRaU46dM

[Dean2]

Charlie had some very interesting and integrated thoughts this week so thought I would post his who newsletter.

Hi all,
2 New Posts This Week...
-7-Chart Monday (3/14/22)
-You Can’t Buy Past Returns
Note: I have a new video channel on YouTube where I’ll be sharing my latest thoughts on markets and investing. View the video accompanying this post here.
___
This week’s letter is sponsored by YCharts. Mention Charlie Bilello to receive 20% off your subscription when you initially sign up for the service.


___
7-Chart Monday (3/14/22)
7 charts from the past week that tell an interesting story in markets and investing…
1) There Is No Impossible in Markets
Two years ago the entire world was shutting down and Gasoline futures hit an all-time low.
Last week, they spiked to an all-time high, surpassing the previous high from 2008. If someone told you this would happen two years ago, you would have said that was impossible. But as we have learned time an again: there is no impossible in markets.



With gasoline futures hitting new highs, it wasn’t long before prices at pump would follow. By the end of the week, the average price of gasoline in the US had hit $4.33, surging past the prior high of $4.11 from 2008.


2) Rising Risk of Recession
Shortly after the US announced a ban on imports of Russian Oil, we saw a spike to over $130 a barrel in WTI Crude, its highest level since 2008.
Crude Oil has now risen 75% in just the last 12 weeks. We’ve only seen a move of this magnitude two previous times in history (Crude Oil futures date back to 1983):
-In August 1990, when Iraq invaded Kuwait. A US recession would begin that month and last until March 1991.
–In June 2020, Oil was rebounding from the pandemic crash.


Many are fearing a repeat of the 1990 scenario, with Consumer Sentiment (University of Michigan survey) plunging to its lowest levels in over 10 years. With the exception of the 2011 Bear Market, sentiment has never been this low in the past without a recession. In a dramatic shift from a year ago, “personal finances were expected to worsen in the year ahead by the largest proportion since the surveys started in the mid-1940s.”


Powered by YCharts
Will the US enter another recession in the the next year? Many now believe so, as the results of my recent twitter poll indicate…


3) The Biggest Concern
What are people worried about?
More than anything else: rising prices continuing to outpace increases in wages. That’s been the case in the US for the last 11 months and is likely to continue in the near term.


Powered by YCharts
February’s inflation rate of 7.9% was the highest we’ve seen in 40 years, and this was before the recent spike in commodity prices.


Here’s the breakdown by category…


Once again, CPI’s largest component (Shelter, at a third of the index) is being significantly understated with rents in the US up nearly 18% in the last year. What this means is that the true inflation rate is much higher, likely north of 10%.


4) The Rate Hikes are Coming
Despite all of the recent turmoil, the inflationary picture is leaving the Fed no choice: it must hike interest rates.
A 0.25% increase at the March 16 FOMC meeting is already priced in by the markets, and additional 0.25% hikes are expected at each meeting through the end of the year (7 hikes in total).
The disconnect between Fed Policy and rising inflation is becoming more glaring each month, with the real Fed Funds now sitting at -7.8%. That’s the lowest we’ve seen in history outside of a single month in 1974.


Powered by YCharts
Monetary policy has never been close to this easy in the past when the Unemployment Rate was at 3.8%, as it is today…



With rates hikes expected, interest rates continue to rise (2-Year Treasury yield has moved up to 1.75% from 0.73% at the start of the year), and bond prices continue to fall. This is now the longest (581 days) and largest (-6.6%) correction in US bonds that we’ve seen in recent history.


If the year ended today, it would be the worst year ever for the bond market (-4.8% year-to-date).


5) Nasdaq 100 Bear Market
Rising interest rates continue to put pressure on the high multiple Tech sector. The Nasdaq 100 is now in a Bear Market, down over 20% from its high.


Powered by YCharts
Many stocks within the index are down much more, including Facebook ($FB) and Netflix ($NFLX) which have been cut in half…


Interestingly, Facebook is looking more and more like a value stock, with its P/E ratio (13.8x) now below IBM (19.9x).



6) Worst Starts in History
The S&P 500 is down 11.8% in the first 48 trading days of 2022, the 4th worst start to a year in history. The worst 5 starts prior to this year (2009, 2020, 1935, 1933, & 1982) all mounted tremendous comebacks to end the year in strong positive territory.


Is another epic comeback in order? Only time will tell, but many seem to believe the S&P 500 will at least end the year higher than where it stands today…


7) When Valuation Proves Meaningless
At the end of February, Russian stocks were among the cheapest in the world, with a CAPE ratio of 7 versus 35 for the US. A week later, an investor in US equities had lost 1% versus a nearly 100% loss in Russian stocks (note: the Russian stock market has been closed since February 28 but trading in all Russian ETFs in the US has suspended at an NAV close to 0).
The lesson: valuations mean nothing when a fat tail event hits and securities are banned from trading. Every stock appears to be at its cheapest level right before it goes to 0.


Bonus Chart: Nickel Breaks the Market
Russia is the world’s third largest producer of Nickel and Norilsk Nickel (of Russia) is the world’s largest Nickel mining company.
It’s no surprise, then, that the price of Nickel would rise, but what happened last week was beyond anyone’s wildest imagination.
Nickel Futures more than tripled in just two days, causing the London Metal Exchange to suspend trading (for the first time in any metal since 1985) as it rushed to resolve a crisis stemming from an $8 billion loss by a large Chinese Nickel producer (Tsingshan Holding Group) that was short the metal.


The Nickel ETN ($JJN) rose 69% in a single trading day, a 40 standard deviation move.

[DiabeticKripple]

anyone else get slaughtered today?

not a good day for me at all

[Map Maker]

not slaughtered but a real weird day.

as Dean noted above, Bond markets are just taking a beating.

The only silver lining is that the bond etfs are all being dripped.
So as I get my dividends and get more shares dripped into the bucket.
I didn't buy the bonds for capital appreciation, I bought them for income, but still hurts.

[bdub]

Not really much working today for us either.

Financials, consumers staples and healthcare were the only thing looking decent today. Oil/commodities, tech all took a beating.

Oil and commodities are moving on war headlines just like they were trading on the Covid news back in the summer and fall. Remember back in July and August oil moved from 75$ down to 62$ before continuing up again into the 84$ level in November. It then corrected again back down to the 65$ level in December before heading north again.

Tech/bonds and anything long duration is continuing to sell off on rising rates expectations. The hedging properties of a bond/equity mix are not going to work in rising rate environment where bonds and equities are both going down if rates rise significantly and the FED crushes earnings. Perhaps we are heading to an environment where nothing much does well for a little while?

FOMC meeting and rate decision will be closely watched this week. 1/4 point or half point move? If the market sees the FEDS comments/outlook as dovish we could get a rally, or if hawkish we could get a further dump. Wednesday should be interesting.

The Canadian market is doing relatively well this year so far down only .2% compared to the SP500, down 12.4% or the Nasdaq down 20.6%.

[Dean2]

It is fun watching the portfolios go up every day, MUCH less fun when they back off for a couple of days straight. The upside, for those sitting on some cash this most recent pull back is a good time to deploy some on cheaper buys. I have a fairly large chunk of cash to redeploy from selling down the banks so these pull backs are good buying opportunities.

[DiabeticKripple]

Originally Posted by Dean2

It is fun watching the portfolios go up every day, MUCH less fun when they back off for a couple of days straight. The upside, for those sitting on some cash this most recent pull back is a good time to deploy some on cheaper buys. I have a fairly large chunk of cash to redeploy from selling down the banks so these pull backs are good buying opportunities.

yeah it was good to see the money in the portfolio jump up, not so fun to watch the crash.

heres hoping its just a shock. Oil is still up around $95 and most energy stocks are cheaper than when it was $80

[Dean2]

Not sure what is driving it, but absolutely HUGE volume at the open this morning. TD, RBC, Enbridge and 9 others have already traded from 6 to 9 MILLION shares in the first few minutes. That is more volume than they usually trade over 2 or 3 days. There are more than 25 stocks that traded greater than 2 million shares right at the open. Could be a very interesting day.

[bdub]

Originally Posted by Dean2

Not sure what is driving it, but absolutely HUGE volume at the open this morning. TD, RBC, Enbridge and 9 others have already traded from 6 to 9 MILLION shares in the first few minutes. That is more volume than they usually trade over 2 or 3 days. There are more than 25 stocks that traded greater than 2 million shares right at the open. Could be a very interesting day.

Option expiration I think is the reason Dean.

21 January 2022
18 February 2022
18 March 2022
31 March 2022 – quarterly
15 April 2022
20 May 2022
17 June 2022
30 June 2022 – quarterly
15 July 2022
19 August 2022
16 September 2022
30 September 2022 – quarterly
21 October 2022
18 November 2022
16 December 2022
31 December 2022 – quarterly

[Dean2]

Originally Posted by bdub

Option expiration I think is the reason Dean.

21 January 2022
18 February 2022
18 March 2022
31 March 2022 – quarterly
15 April 2022
20 May 2022
17 June 2022
30 June 2022 – quarterly
15 July 2022
19 August 2022
16 September 2022
30 September 2022 – quarterly
21 October 2022
18 November 2022
16 December 2022
31 December 2022 – quarterly

Could be I guess but even on Option Expiration that is a ton of volume. Feb 18 ENB traded 3.9 million shares for the whole day, today they are at 9.2 million already, RBC traded 2.2 million Feb 18, are over 8 million this morning. To be clear though, ENB really does have some huge volume days, some in the 20 to 30 million shares and RBC can have 10 million share days. Just surprised to see so many shares at over 2 million traded in the first few minutes. Option expiry is likely the only reasonable explanation, that is a ton of options being played with.

[bdub]

Probably has something to do with the extreme volatility of the last month due to the war I imagine.

[Glion]

So what are people doing currently in this market? My energy stuff is up alot and I am not sure how long to hold it. I sold my RBC and used that to day trade energy as well as Tesla, however now I am unsure which way to proceed and where to direct the cash. I don't have alot of confidence in the markets currently.

[bdub]

Originally Posted by Glion

So what are people doing currently in this market? My energy stuff is up alot and I am not sure how long to hold it. I sold my RBC and used that to day trade energy as well as Tesla, however now I am unsure which way to proceed and where to direct the cash. I don't have alot of confidence in the markets currently.

Doing nothing, enjoying the ride. Haven't made any significant changes since last summer.

[Map Maker]

Yeah. Been a hell of a run.
My last all time high was July 2016 and tsx was at 16,000
Now it’s at 22,000.

The pessimistic side of me wants to take some profits but the greed in me wants to just ride it out.

Old saying “go away in may, buy in the fall”

[KGB]

Shopify was a major “pusher” for the tsx yesterday, and still it is sitting at 57% off the all time highs…
There are a few analysts saying it’s a great buy at this levels. And there are few that saying it is still badly overvalued…
I originally purchased it below $100 and sold around 150 after it came down from 250… Now I’m sitting and itching….
Anyone of you guys is buying it now?

[fishtank]

Buffet is going to make bank with the warrants on oxy , this feels like that deal/warrants he made with Bank of America. Don’t think buffet will hold long term, probably will exit it when the warrants price hit . Brk name will bring in lot of cash flow capital , it’s will help oxy which was having some debt issues.

[fishtank]

Originally Posted by Map Maker

Yeah. Been a hell of a run.
My last all time high was July 2016 and tsx was at 16,000
Now it’s at 22,000.

The pessimistic side of me wants to take some profits but the greed in me wants to just ride it out.

Old saying “go away in may, buy in the fall”

exit the initial capital and let the profit ride …

[Map Maker]

Originally Posted by fishtank

exit the initial capital and let the profit ride …

Tried that, never seemed to work for me.

The best exit strategy I found is to write down when I want to exit when I buy a stock.

[fishtank]

Originally Posted by Map Maker

Tried that, never seemed to work for me.

The best exit strategy I found is to write down when I want to exit when I buy a stock.

Well make sure you have a plan and purpose for the cash out , the sell in may didn’t work out too well in the pass couple of years . When I exit a position and don’t see any deals , I put it on a etf like Zwu and EIT and collect a little interest ( these paid monthly ), until a deal comes up

[Dean2]

Originally Posted by KGB

June 2, 2021 Ok buddy, got some cash thrown into the ppl yesterday based on your advise….If I’m not up at least 20% in a month- I coming to visit you! Just kidding, you know. But I do agree with your point of view. I think we will see ppl in a high 40is by the end of the year….

So, KGB, 9 months down the road and you are up 30%. You can send that bottle of Crown over any time.


Once more, PPL is just one example of the benefits of being invested. Anyone that sat on the sidelines for the last year has missed a very large run up in share prices, assuming those that are invested avoided the Fangs or Tech. Lots of high quality, dividend paying stocks are up 25-75% in the past year, while inflation is running near 20% measured against real cost increases that affect the average persons' consumption. That means, $100,000 cash a year ago is worth $80,000 today. $100,000 in the model portfolio I post, including dividends, is worth at least $125,000, depending on the individual stock weights.

I hear people talking a lot about selling out into cash to avoid the upcoming drop, but no one seems to know when the drop will happen. I know one is coming too, but I have no idea when. My suggestion as always, build a good resilient portfolio, and try to look at it only every couple of weeks or so. Watching the daily fluctuations will drive most people nuts.

[Dean2]

If you haven't done it already, lock in your mortgages. Last fall you could lock 5 year fixed for 1.85 to 2%. Today the posted 5 year rate is 4%. If you are in a closed Variable you are paying 2-2.5% which means you are already paying more than last falls 5 year fixed. With the forecast being that the bank rate will rise at least 3% on the low side and 5% on the high side the Variable rate is going to be over 5% in less than 12 months.

Another thing to think about, if you have fixed rate bonds in your portfolio, good time to sell them off, not as good as 8 months ago but better than it will be 8 months from now.

Inflation isn't slowing down and the NDP Liberal alliance means the profligate spending will continue and further drive inflation. Bank of Canada and the US Fed are stuck between a rock and a hard place, print money to fund deficit gov spending and pump up the rate to try and hold the line on out of control inflation. Neither is good for consumers and voters.