I had to sell stocks in my registered accounts to ensure that I have enough money there to cover this year’s withdrawal and withdrawals for the next few years. The market is relatively high and so it is not a bad time to sell. I basically look for stocks with the lowest dividend yield and sell them.
This year I sold Canadian Tire (TSX-CTC.A) and Saputo (TSX-SAP). According to the Globe and Mail, the dividend yield on Canadian Tire is 1.657% and on Saputo is 1.576%. I am putting what money I do not need this year from my registered accounts in 1 year GIC.
I used to have the balance in an MMF, but TD’s Fixed Income Desk told me that TD has a TD Investment Savings Account (TDB8150) with an interest rate of 1.2%. This rate is, of course, better than the MMF of around 0.32%.
I have 3 to 5 years of withdrawals required from my registered account in cash or near cash. Bear markets can last up to 3 years, so it is wise to have at least 3 years of cash in an RRSP account you will be withdrawing funds from. To have 4 or 5 years of cash gives you a margin of safety.
On my other blog I am today writing about Northland Power Inc. (TSX-NPI, OTC-NPIFF) ... continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 26, 2014
Monday, November 24, 2014
October 2014 Market Correction
How did my portfolio do in connection with the market correction we had in October 2014? If you have dividend paying stocks, it should not correct as much as the market does.
I look at the TSX Index on August 29, 2014 and the one for October 21, 2014. The numbers were 15,558.17 and 15111.13. So from the end of August 2014 to last Friday, October 21, 2014 the TSX Index is down by 2.87%.
I look at my portfolio on August 29, 2014 and for October 21, 2014. I converted by US account into CDN$ based on the exchange rates of August 29, 2014 and for October 21, 2014. I added back into my account all monies taken out and subtracted any new money. My portfolio is up by 1.09% since the end of August 2014.
I have put into my TFSA account some riskier dividend paying small cap stocks. This account is down by 4.42%. I started this account in 1997. My US account in US$ is down by 2.18% but in CDN$ it is up by 1.24%.
My oldest account, where I have stocks dating back to the early 1980's, is up by 3.07%. I did not start this account until 1986, but I had stocks before then and placed them in this account. My RRSP account, started in 1995 is down by 1.24% and my RRIF account, started in 1998 is down by 0.09%. (I had some locked in pension money and could only access it by an RRIF account.)
On my other blog I am today writing about Keyera Corp. (TSX-KEY, OTC-KEYUF) ... continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
I look at the TSX Index on August 29, 2014 and the one for October 21, 2014. The numbers were 15,558.17 and 15111.13. So from the end of August 2014 to last Friday, October 21, 2014 the TSX Index is down by 2.87%.
I look at my portfolio on August 29, 2014 and for October 21, 2014. I converted by US account into CDN$ based on the exchange rates of August 29, 2014 and for October 21, 2014. I added back into my account all monies taken out and subtracted any new money. My portfolio is up by 1.09% since the end of August 2014.
I have put into my TFSA account some riskier dividend paying small cap stocks. This account is down by 4.42%. I started this account in 1997. My US account in US$ is down by 2.18% but in CDN$ it is up by 1.24%.
My oldest account, where I have stocks dating back to the early 1980's, is up by 3.07%. I did not start this account until 1986, but I had stocks before then and placed them in this account. My RRSP account, started in 1995 is down by 1.24% and my RRIF account, started in 1998 is down by 0.09%. (I had some locked in pension money and could only access it by an RRIF account.)
On my other blog I am today writing about Keyera Corp. (TSX-KEY, OTC-KEYUF) ... continue...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 19, 2014
Money Show 2014 - David Wyss
David Wyss an economist is a visiting fellow, Watson Institute at Brown University. His talk was called "Half-Speed Ahead". This was the last presentation at the Money show.
The US is in year 4 of its recovery. The European debt crisis can spread to the US. The US government is dysfunctional.
Housing is still a problem. There is still a house bubble. House prices got too high and they built too many houses. The only thing to do is to stop building houses and for house prices to drop. Foreclosures peaked in 2013. There is still a pool of underwater houses, but things are moving in the right direction.
The housing bubble was not just in the US. There was housing bubbles in the UK, Ireland and Spain. All 4 Irish banks were bankrupt and needed to be bailed out. Spain did not recognize it had a banking crisis and so now they have large unemployment.
The Fed brought down bond and mortgage rates by buying bonds and mortgages. (They also brought down the Fed interest rate.) The expansion of the central bank's balance sheet happened in the UK and the US. In the EU people cannot walk away from mortgages like they can in the US. However, this does not mean that the mortgages are going to be paid.
Spanish mortgages where not only held by Spanish banks, but were held by German and UK banks also. However, no one is saying who is holding these mortgages. Interest rates in the EU converged in 1999 with the Euro but they are now diverging. German and French banks loaned money to other EU countries.
The US and the UK have bankruptcy rules and so got on the problem right away. So they both are doing better economically. The GDP growth has turned around. However in the EU zone there is no GDP growth and there is high unemployment. The EU is not turning around now. It will be a long hard time for them to get out of their present difficulties.
If you have excessive debt going into a recession, it is hard to get out of the recession. You cannot spend your way out. It is a long slow process to get out. Their drag of weak growth is affecting the rest of the world.
A lot of lower unemployment is because participating rates are lower, people are retiring and children are staying in school longer. The global recovery remains fragile and uneven. In the last recession, Canada did better than the US but now the US is doing better than Canada. The US is stagnating, Japan has problems and China is slowing down. Things are improving, but they are not improving very fast.
China probably has more growth over the next 10 years. Good idea to buy Chinese companies listed on the Hong Kong exchange.
The US$ is still the reserve currency. People are not willing to use the Euro. China would like people to use their currency, but it is not convertible.
In Canada house prices are too high but as long as the economy stays stable they could stay too high for a long time. The house bubble in Canada is smaller than the one in the US. Canadian housing prices could be flat for a long time rather than drop.
China is not as interested in the tar sands oil as it once was and it has shale gas. The Saudi's want to discourage new sources of oil so they are bring the price of oil down.
He thinks that the EU will survive because of politics. Ireland was the first to crash and now it has turn around. There is a need for political will.
On my other blog I am today writing about IBI Group Inc. (TSX-IBG, OTC-IBIBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
The US is in year 4 of its recovery. The European debt crisis can spread to the US. The US government is dysfunctional.
Housing is still a problem. There is still a house bubble. House prices got too high and they built too many houses. The only thing to do is to stop building houses and for house prices to drop. Foreclosures peaked in 2013. There is still a pool of underwater houses, but things are moving in the right direction.
The housing bubble was not just in the US. There was housing bubbles in the UK, Ireland and Spain. All 4 Irish banks were bankrupt and needed to be bailed out. Spain did not recognize it had a banking crisis and so now they have large unemployment.
The Fed brought down bond and mortgage rates by buying bonds and mortgages. (They also brought down the Fed interest rate.) The expansion of the central bank's balance sheet happened in the UK and the US. In the EU people cannot walk away from mortgages like they can in the US. However, this does not mean that the mortgages are going to be paid.
Spanish mortgages where not only held by Spanish banks, but were held by German and UK banks also. However, no one is saying who is holding these mortgages. Interest rates in the EU converged in 1999 with the Euro but they are now diverging. German and French banks loaned money to other EU countries.
The US and the UK have bankruptcy rules and so got on the problem right away. So they both are doing better economically. The GDP growth has turned around. However in the EU zone there is no GDP growth and there is high unemployment. The EU is not turning around now. It will be a long hard time for them to get out of their present difficulties.
If you have excessive debt going into a recession, it is hard to get out of the recession. You cannot spend your way out. It is a long slow process to get out. Their drag of weak growth is affecting the rest of the world.
A lot of lower unemployment is because participating rates are lower, people are retiring and children are staying in school longer. The global recovery remains fragile and uneven. In the last recession, Canada did better than the US but now the US is doing better than Canada. The US is stagnating, Japan has problems and China is slowing down. Things are improving, but they are not improving very fast.
China probably has more growth over the next 10 years. Good idea to buy Chinese companies listed on the Hong Kong exchange.
The US$ is still the reserve currency. People are not willing to use the Euro. China would like people to use their currency, but it is not convertible.
In Canada house prices are too high but as long as the economy stays stable they could stay too high for a long time. The house bubble in Canada is smaller than the one in the US. Canadian housing prices could be flat for a long time rather than drop.
China is not as interested in the tar sands oil as it once was and it has shale gas. The Saudi's want to discourage new sources of oil so they are bring the price of oil down.
He thinks that the EU will survive because of politics. Ireland was the first to crash and now it has turn around. There is a need for political will.
On my other blog I am today writing about IBI Group Inc. (TSX-IBG, OTC-IBIBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, November 18, 2014
Money Show 2014 - Iain Butler
Iain Butler is an advisor at the Motley Fool. His talk was called "Long Term Investing in a Short-Term World". His slide presentation is here.
Individual investors are slow movers and this can be an advantage over Bay Street. The foolish approach thinks that time in the market will be your greatest natural advantage. They think that timing the market is a fool's game.
Dennis Gartman on BNN said on April 7, 2014 that he sold all his stock was zero exposed to the stock market. On April 14, 2014 he said he was pleasantly long on stocks.
Institutional investors are evaluated every 90 days, so they cannot invest long term. What they do is copy the market index because they are measured against the market index. They are what are called closet indexers. Institutional money is also called the smart money.
The foolish way is to focus on great companies and hold them for the long term. As John Reed writes in his book Succeeding - "When you initially start to research a field, it seems like you need to memorize a zillion things. You do not. Exactly what you require is to identify the core concepts - typically 3 to twelve of them - that govern the industry. The million things you thought you'd to memorize are just different combinations of the core principles."
Iain Butler says there are 4 ways to invest. This is the complete list and 3 and 4 eventually become #1
Do nothing are the two most powerful words in investing. The big money is not in buy and selling but in sitting. Dollar cost averaging is boring, but can produce a maximum return. The preference should be with companies that reward shareholders with Dividends and Buy Backs.
A rule of thumb is that is the market has done poorly over the past 10 years; it will do great over the next 10 years. You should have a list of stocks you want to buy and keep it for the time when the market falls. A 10% correction happens once a year.
On my other blog I am today writing about Encana Corp. (TSX-ECA, NYSE-ECA) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Individual investors are slow movers and this can be an advantage over Bay Street. The foolish approach thinks that time in the market will be your greatest natural advantage. They think that timing the market is a fool's game.
Dennis Gartman on BNN said on April 7, 2014 that he sold all his stock was zero exposed to the stock market. On April 14, 2014 he said he was pleasantly long on stocks.
Institutional investors are evaluated every 90 days, so they cannot invest long term. What they do is copy the market index because they are measured against the market index. They are what are called closet indexers. Institutional money is also called the smart money.
The foolish way is to focus on great companies and hold them for the long term. As John Reed writes in his book Succeeding - "When you initially start to research a field, it seems like you need to memorize a zillion things. You do not. Exactly what you require is to identify the core concepts - typically 3 to twelve of them - that govern the industry. The million things you thought you'd to memorize are just different combinations of the core principles."
Iain Butler says there are 4 ways to invest. This is the complete list and 3 and 4 eventually become #1
- Unsuccessfully
- Long Term (with varying degrees of success)
- Short Term (success due to luck)
- Short Term (success due to manipulation/fraud)
Do nothing are the two most powerful words in investing. The big money is not in buy and selling but in sitting. Dollar cost averaging is boring, but can produce a maximum return. The preference should be with companies that reward shareholders with Dividends and Buy Backs.
A rule of thumb is that is the market has done poorly over the past 10 years; it will do great over the next 10 years. You should have a list of stocks you want to buy and keep it for the time when the market falls. A 10% correction happens once a year.
On my other blog I am today writing about Encana Corp. (TSX-ECA, NYSE-ECA) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, November 17, 2014
Money Show 2014 - Jimmy Mengel
Jimmy Mengel is the Editor of the Outsiders Club and an Investment Director at the Crow's Nest. His talk was called "Investing after a Crash: Buying Cheap Dividend Reinvestment Plans".
Bubbles:
The only reason to sell a stock is because you want to buy another more attractive stock. After the 1987 crash Warren Buffett bought coke. In 2008 was the time to buy US banks. Return on Bank of America was 450% and on Citibank was 384%.
Why would you use DRIPs? There are no brokerage fees. You can accumulate more shares as the market drops. However, companies are forbidden to advertise DRIPs.
In market crashes think long term. Do not panic. Keep calm and buy stocks you have always wanted to buy.
On my other blog I am today writing about Encana Corp. (TSX-ECA, NYSE-ECA) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Bubbles:
- High confidence
- Lopsided Bullishness
- Overvaluation
- Hind sight blindness
The only reason to sell a stock is because you want to buy another more attractive stock. After the 1987 crash Warren Buffett bought coke. In 2008 was the time to buy US banks. Return on Bank of America was 450% and on Citibank was 384%.
Why would you use DRIPs? There are no brokerage fees. You can accumulate more shares as the market drops. However, companies are forbidden to advertise DRIPs.
In market crashes think long term. Do not panic. Keep calm and buy stocks you have always wanted to buy.
On my other blog I am today writing about Encana Corp. (TSX-ECA, NYSE-ECA) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, November 14, 2014
Money Show 2014 - David Stanley
On Saturday, the Money Saver Magazine has presentations filling the whole day. The Firth one was called "Beating the TSX - It Works". This presentation was done by David Stanley.
This presentation is on YouTube starting here. There is also a website talking about David Stanley here. David Stanley says he believes in Share Clubs. There is information on these clubs here.
There is a lot of turmoil in the market, but you do not have to be in turmoil. The market is currently overpriced. The risk premium over bonds is very high. There is an overreaction to Ebola. Interest rates are very low.
Your real return is what you get after inflation. GICs give you safety. Safety can be a factor in how well you sleep at night. You can go talk to your bank manager to get a better 5 year GIC rate. It will be difficult to get the economy to grow with an aging population.
Buttonwood says that future returns from a stock/bond portfolio will be barely positive in the future. (Buttonwood seems to be a blog by The Economist.) Short term will be bad. However, the median and long term will be pretty good. The Canadian economy is in not bad shape. We are back into a secular bull market.
You should read Nassim Nicholas Taleb book called Antifragile: Things That Gain from Disorder. There is an entry for this book in Wikipedia.
We need to buy blue chip stocks; these are stocks that pay dividends. With dividend stock we can take advantage of steady, increasing payments. Dividends will account for 90% of your return. We can also take advantage of compounding with dividend stocks if we use DRIPs or reinvest the dividends. Over the past 10 years the TSXT returned 144.09% and the TSX returned 65.1%.
We can do the same by buying plain vanilla ETFs. There is a site called longrundata.com. This site has a lot of data for investors. (This site only seems to have data on US listed stock.)
He held a portfolio if ENB, TD, BCE, NA, CAR.UN, JNJ, POW, EMA and TA for 15 and had Annual Total Return (ATR) of 12.13%. Annual dividend growth over 5 years was 8.04% and over 10 years was 14.07%. The best sector is TURF that is Telecoms, Utilities, Real Este and Financials. Pipelines are included in utilities.
His theory of beating the TSX is based on Michael O'Higgins' book called "Beating the Dow" or the "Dogs of the Dow". What David Stanley does is use the TSX60 but excludes the former income trust stocks. Note all stocks in the TSX60 are blue chip stocks. He orders the stocks from high to low dividend yield. He takes the top 10 dividend yielders and puts the same amount of money in each stock.
There are disadvantages. If you invest in stocks you have no one to blame buy yourself. There could be dividend cuts and tax code changes. There could be problems with the index itself. For example in 1999, Laidlaw was 94% of the index.
There was an article in MacLean's calling seniors old, rich and spoiled. See the article here. It is easier to make money than to hold on to money. Dividends help to hold on to money. There is less risk and higher returns in passive investing. Get an ETF of Blue Chips stock. You could get low Beta stocks. There are no REITs in the TSX60, so it is a good idea to buy some REITs.
It is a good idea to join a Share Club. Read Ross Grant's book called Destination: Early Financial Independence. It is on Amazon.
On my other blog I am today writing about Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
This presentation is on YouTube starting here. There is also a website talking about David Stanley here. David Stanley says he believes in Share Clubs. There is information on these clubs here.
There is a lot of turmoil in the market, but you do not have to be in turmoil. The market is currently overpriced. The risk premium over bonds is very high. There is an overreaction to Ebola. Interest rates are very low.
Your real return is what you get after inflation. GICs give you safety. Safety can be a factor in how well you sleep at night. You can go talk to your bank manager to get a better 5 year GIC rate. It will be difficult to get the economy to grow with an aging population.
Buttonwood says that future returns from a stock/bond portfolio will be barely positive in the future. (Buttonwood seems to be a blog by The Economist.) Short term will be bad. However, the median and long term will be pretty good. The Canadian economy is in not bad shape. We are back into a secular bull market.
You should read Nassim Nicholas Taleb book called Antifragile: Things That Gain from Disorder. There is an entry for this book in Wikipedia.
We need to buy blue chip stocks; these are stocks that pay dividends. With dividend stock we can take advantage of steady, increasing payments. Dividends will account for 90% of your return. We can also take advantage of compounding with dividend stocks if we use DRIPs or reinvest the dividends. Over the past 10 years the TSXT returned 144.09% and the TSX returned 65.1%.
We can do the same by buying plain vanilla ETFs. There is a site called longrundata.com. This site has a lot of data for investors. (This site only seems to have data on US listed stock.)
He held a portfolio if ENB, TD, BCE, NA, CAR.UN, JNJ, POW, EMA and TA for 15 and had Annual Total Return (ATR) of 12.13%. Annual dividend growth over 5 years was 8.04% and over 10 years was 14.07%. The best sector is TURF that is Telecoms, Utilities, Real Este and Financials. Pipelines are included in utilities.
His theory of beating the TSX is based on Michael O'Higgins' book called "Beating the Dow" or the "Dogs of the Dow". What David Stanley does is use the TSX60 but excludes the former income trust stocks. Note all stocks in the TSX60 are blue chip stocks. He orders the stocks from high to low dividend yield. He takes the top 10 dividend yielders and puts the same amount of money in each stock.
There are disadvantages. If you invest in stocks you have no one to blame buy yourself. There could be dividend cuts and tax code changes. There could be problems with the index itself. For example in 1999, Laidlaw was 94% of the index.
There was an article in MacLean's calling seniors old, rich and spoiled. See the article here. It is easier to make money than to hold on to money. Dividends help to hold on to money. There is less risk and higher returns in passive investing. Get an ETF of Blue Chips stock. You could get low Beta stocks. There are no REITs in the TSX60, so it is a good idea to buy some REITs.
It is a good idea to join a Share Club. Read Ross Grant's book called Destination: Early Financial Independence. It is on Amazon.
On my other blog I am today writing about Chesswood Group Ltd. (TSX-CHW, OTC-CHWWF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Thursday, November 13, 2014
Money Show 2014 - Bruce Cappon
On Saturday, the Money Saver Magazine has presentations filling the whole day. The fourth one was called "Travelling without Financial Tragedy". This presentation was done by Bruce Cappon. He works in the travel insurance business.
The first thing than Bruce Cappon brought up was that fact that a lot of people answer travel insurance questions incorrectly and then if they have a claim it is deigned under the misrepresentation clause. You do not just have to be honest, you have to be perfect. You want an insurance product that has a compassion clause or a penalty cap clause.
He spent a lot a time going over sample questions and showing how people can get tripped up. There is no onus on insurance companies to ensure questions would elicit correct responses.
You can have a change in health between the time you apply for insurance and the time you travel. Your claim could be deigned. What you want is a lock in your good health clause rider with your insurance.
You need to check into what you are getting and not just buy travel insurance based on price. He is with First Rate Insurance Inc. and his web site is here. There are a number of related recent article by Bruce Cappon on this site.
On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
The first thing than Bruce Cappon brought up was that fact that a lot of people answer travel insurance questions incorrectly and then if they have a claim it is deigned under the misrepresentation clause. You do not just have to be honest, you have to be perfect. You want an insurance product that has a compassion clause or a penalty cap clause.
He spent a lot a time going over sample questions and showing how people can get tripped up. There is no onus on insurance companies to ensure questions would elicit correct responses.
You can have a change in health between the time you apply for insurance and the time you travel. Your claim could be deigned. What you want is a lock in your good health clause rider with your insurance.
You need to check into what you are getting and not just buy travel insurance based on price. He is with First Rate Insurance Inc. and his web site is here. There are a number of related recent article by Bruce Cappon on this site.
On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 12, 2014
Money Show 2014 - Alan MacDonald
On Saturday, the Money Saver Magazine has presentations filling the whole day. The third one was called "Building a Retirement Income Plan that Works". This presentation was done by Alan MacDonald. He works in wealth management.
He met an 80 year old widow, Jane, who inherited an estate in the 1950's of $300,000 in GICs and it is paying $9,000 a year. The problem is that $300,000 in the 1950's is worth $3M today. He met another 80 year old widow, Margaret, who inherited an estate in the 1950's worth $300,000 invested in blue chip stock. That portfolio is worth $3M today and is producing income of $80,000..
Should you invest for growth or to keep your capital? You should play the long game for investing. Inflation is your enemy. Growth is survival. Volatility is necessary for growth. Market corrections are normal. Retirement is a long game. Risk and return are related. You should manage risk, not avoid risk. GIC was a big risk for Jane, but it did not show up for a long time.
For current retirees, they will have 5 to 6 major market corrections in their future. There are too big levels you have in retirement planning. One is controlling or modifying your spending. The second one is reliably investing for growth and staying ahead of inflation. The amount of money you make and the amount you have do not correlate.
Level 1 is to control your spending. Why your budget failed.
Volatility and risk, are they the same thing? The answer is no. In 1984 the TSX was at 2300 and today it is 14,300. The S&P500 was 150 and is 1,925 today. Over this period there was 5 or 6 major market crisis. A typical decline every 3 years is from 15 to 19%. Every 5.5 years there is a decline of 20% to 52%. Once a generation you get a 1930's or a 2008's decline. He believes in buying ETFs and not individual stocks.
Successful long term investors are counter cultural. You need a reliable strategy. Create a reliable strategy that will fund your projections. You need a minimum of 5 years of liquidity. The longest market corrections last around 3 years, historically. You do not want to have to take out money in a portfolio in a bear market.
On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
He met an 80 year old widow, Jane, who inherited an estate in the 1950's of $300,000 in GICs and it is paying $9,000 a year. The problem is that $300,000 in the 1950's is worth $3M today. He met another 80 year old widow, Margaret, who inherited an estate in the 1950's worth $300,000 invested in blue chip stock. That portfolio is worth $3M today and is producing income of $80,000..
Should you invest for growth or to keep your capital? You should play the long game for investing. Inflation is your enemy. Growth is survival. Volatility is necessary for growth. Market corrections are normal. Retirement is a long game. Risk and return are related. You should manage risk, not avoid risk. GIC was a big risk for Jane, but it did not show up for a long time.
For current retirees, they will have 5 to 6 major market corrections in their future. There are too big levels you have in retirement planning. One is controlling or modifying your spending. The second one is reliably investing for growth and staying ahead of inflation. The amount of money you make and the amount you have do not correlate.
Level 1 is to control your spending. Why your budget failed.
- You made it up
- You sucked the fun out of your life
- The stakeholders did not buy into the budget
- Start with what you spend today and track your cash flow
- Decide on what is most important in your life and keep those things in your budget
- Get buy-in from your stakeholders
- Use cash (take out on Sunday night what you need for the week and only spend that)
Volatility and risk, are they the same thing? The answer is no. In 1984 the TSX was at 2300 and today it is 14,300. The S&P500 was 150 and is 1,925 today. Over this period there was 5 or 6 major market crisis. A typical decline every 3 years is from 15 to 19%. Every 5.5 years there is a decline of 20% to 52%. Once a generation you get a 1930's or a 2008's decline. He believes in buying ETFs and not individual stocks.
Successful long term investors are counter cultural. You need a reliable strategy. Create a reliable strategy that will fund your projections. You need a minimum of 5 years of liquidity. The longest market corrections last around 3 years, historically. You do not want to have to take out money in a portfolio in a bear market.
On my other blog I am today writing about Cenovus Energy Inc. (TSX-CVE, NYSE-CVE) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, November 11, 2014
Money Show 2014 - John DeGoey
On Saturday, the Money Saver Magazine has presentations filling the whole day. The second one was called "Upcoming Regulatory Reforms and How They Affect You". This presentation was done by John DeGoey. The regulatory reform talked about is for Financial Advisors.
John DeGoey has a web site. He wrote a book called The Professional Financial Advisor and version III is now out. He is in the top 50 Wealth Professional Advisor 2014. John DeGoey is also on Twitter.
Science testing and necessary disclosure underpins professionalism. You should read the books on Freakonomics. See the website here. People respond to incentives, however, some responses can be perverse and not in the best interest of clients.
The OSC (Ontario Securities Commission) has a fair dealing Model (FDM). The idea was to disclose cost and conflicts that are both real and perceived when giving financial advice. The OSC turn the FDM over the Canadian Securities Administration and now it is called Client Relationship Model (CRM).
CRM I, introduced in March 2012 was viewed as a nuisance (extra paperwork), but did not change anything. Old clients were asked risk level for each account. Products might be invested for the long term but could be deemed speculation. This was just simple risk assessment.
There is now a CRM II model. New disclosure includes pre-trade commission disclosure and the use of Fund Facts to replace the prospectus.
Other places are more aggressive in rules for Financial Advisors, like UK and Australia where they banned embeded commissions. Some jurisdictions are improving fiduciary standards for all advisors. They are also moving to increase the proficiency requirements of all advisors.
In 2015 there will be changes in how market valuations are calculated. The client statements are to include positions and book value in a consistent way. In 2016 there will be client specific account performance rating for 1, 3, 5 and 10 years and since inception. There will be full compensation disclosure from advisor, dealer and fund companies.
For after 2016, "this is what I think will happen and this is what I would like to see". We can learn from what UK and Australia did. After reform in the UK, the advisor population dropped 25% due to higher proficiency standards and removal of embedded commission. Married people are happier than single people, but correlation is not causation.
Do we in Canada need to raise proficiency? Yes. What will happen to small investors (investor with less than $100K)? There should be no change. If client is viable under the old rules they should be viable under the new rules. However, investors with little money may use Robo Advisors.
Is product cost consideration? Will it be? People with high cost products now may move to low cost products. Is current advisor population low, high or about right? We could get rid of one third of our advisors.
Do clients understand how much advisors are paid? Will improved transparencies help? Does disclosure help investors? The answer is ABC, Alpha, Beta and Cost. Alpha will beat the market and Beta will match the market. Option A is to statistically replicate the market and charge a 0.5% fee. This is Beta. Options B is for an active management and 1.5% fee. We should be moving to low cost products.
William F. Sharpe says if you measure actively managed and passively managed funds, the performance will be the same. They have to be. Cost and performance are negatively correlated. Past performance is no a reliable indicator of future performance.
Mark Carhart says that past results does not inform future results as far as mutual funds are concerned. Books on best performing funds make no sense. A mutual fund may beat their benchmark over 5 years, but the chances of beating their benchmark over 50 years is 1%.
Does disclosure level the playing field regarding knowledge asymmetries or would an outright ban be more appropriate in regards to commissions? He thinks a ban is the way to go. Otherwise it can lead to the panhandle effect. People say fine you are up front about commissions and go with high commission products.
Fund managers are overconfidence. Over 21 years of asking fund managers if they are above average, average or below average fund manager. None says below average, but statistically 50% are before their fees. We cannot be all above average. Only a fraction is. Something like 10% of all actively managed funds has a long term (10 years) track record that beats the benchmark.
It is highly unlikely you can beat the market. All facts are disclosed. All personal opinions should be claimed as such. You should read books by Belsky and Gilovich, Cadsby, Thaler, Statman, Shefrin, and Taleb.
He thinks we should move to eliminate embedded commissions and more to a fiduciary standard. Ontario may be the second province to regulate financial planning after Quebec. You can find a basic PDF presentation from John DeGoey here.
On my other blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
John DeGoey has a web site. He wrote a book called The Professional Financial Advisor and version III is now out. He is in the top 50 Wealth Professional Advisor 2014. John DeGoey is also on Twitter.
Science testing and necessary disclosure underpins professionalism. You should read the books on Freakonomics. See the website here. People respond to incentives, however, some responses can be perverse and not in the best interest of clients.
The OSC (Ontario Securities Commission) has a fair dealing Model (FDM). The idea was to disclose cost and conflicts that are both real and perceived when giving financial advice. The OSC turn the FDM over the Canadian Securities Administration and now it is called Client Relationship Model (CRM).
CRM I, introduced in March 2012 was viewed as a nuisance (extra paperwork), but did not change anything. Old clients were asked risk level for each account. Products might be invested for the long term but could be deemed speculation. This was just simple risk assessment.
There is now a CRM II model. New disclosure includes pre-trade commission disclosure and the use of Fund Facts to replace the prospectus.
Other places are more aggressive in rules for Financial Advisors, like UK and Australia where they banned embeded commissions. Some jurisdictions are improving fiduciary standards for all advisors. They are also moving to increase the proficiency requirements of all advisors.
In 2015 there will be changes in how market valuations are calculated. The client statements are to include positions and book value in a consistent way. In 2016 there will be client specific account performance rating for 1, 3, 5 and 10 years and since inception. There will be full compensation disclosure from advisor, dealer and fund companies.
For after 2016, "this is what I think will happen and this is what I would like to see". We can learn from what UK and Australia did. After reform in the UK, the advisor population dropped 25% due to higher proficiency standards and removal of embedded commission. Married people are happier than single people, but correlation is not causation.
Do we in Canada need to raise proficiency? Yes. What will happen to small investors (investor with less than $100K)? There should be no change. If client is viable under the old rules they should be viable under the new rules. However, investors with little money may use Robo Advisors.
Is product cost consideration? Will it be? People with high cost products now may move to low cost products. Is current advisor population low, high or about right? We could get rid of one third of our advisors.
Do clients understand how much advisors are paid? Will improved transparencies help? Does disclosure help investors? The answer is ABC, Alpha, Beta and Cost. Alpha will beat the market and Beta will match the market. Option A is to statistically replicate the market and charge a 0.5% fee. This is Beta. Options B is for an active management and 1.5% fee. We should be moving to low cost products.
William F. Sharpe says if you measure actively managed and passively managed funds, the performance will be the same. They have to be. Cost and performance are negatively correlated. Past performance is no a reliable indicator of future performance.
Mark Carhart says that past results does not inform future results as far as mutual funds are concerned. Books on best performing funds make no sense. A mutual fund may beat their benchmark over 5 years, but the chances of beating their benchmark over 50 years is 1%.
Does disclosure level the playing field regarding knowledge asymmetries or would an outright ban be more appropriate in regards to commissions? He thinks a ban is the way to go. Otherwise it can lead to the panhandle effect. People say fine you are up front about commissions and go with high commission products.
Fund managers are overconfidence. Over 21 years of asking fund managers if they are above average, average or below average fund manager. None says below average, but statistically 50% are before their fees. We cannot be all above average. Only a fraction is. Something like 10% of all actively managed funds has a long term (10 years) track record that beats the benchmark.
It is highly unlikely you can beat the market. All facts are disclosed. All personal opinions should be claimed as such. You should read books by Belsky and Gilovich, Cadsby, Thaler, Statman, Shefrin, and Taleb.
He thinks we should move to eliminate embedded commissions and more to a fiduciary standard. Ontario may be the second province to regulate financial planning after Quebec. You can find a basic PDF presentation from John DeGoey here.
On my other blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, November 10, 2014
Money Show 2014 - Burns and Johnston
On Saturday, the Money Saver Magazine has presentations filling the whole day. The first one was called "Putting it all Together for a Worry-Free Retirement". This presentation was done by Ian Burns and Shelley Johnston.
The first problem with retirement is that we could live too long. A mountain climber's goal is to reach the top and come down safety. Most accidents happen on the way down a mountain. There are two parts of retirement, accumulation and distribution. In the accumulation phase asset allocation is important. In the Distribution phase, Income Allocation is important. The problems are health, taxes and longevity.
Everyone changes in a 3 year life cycle. So focus on the next 3 years and then the 3 years after that. We need to manage risk and lifestyle risk is a concert as is longevity. Consider that 50% of people will lie beyond the standard life expectancy.
As far a health goes, we need to have assets for long term care. Two thirds of retirees over 65 will need some form of long term care. This could come from family or an institution. Institutional care can cost $3,000 to $5,000 a month.
There is a liquidity risk. The concern is that there will be no flexibility when needed. Change is constant. This can be help with a Tax Fee Savings Account. There is a risk of the death of a partner. This will cause lifestyle changes. There will also be a reduction in income. We also face a legacy risk. We may not be able to leave a legacy. We may fail to leave a lasting impression.
There are financial risks such as inflation. This causes the costs of goods to increase. The impact might be the value of our income may not keep pace with inflation. There is the financial risk of low interest rates. This can erode our capital. The impact might be that we run out of money or take more risks.
The presenters believed that fix income products are a component of a good asset allocation plan. If the market has significant loses in the first 5 years of retirement, this could deplete a portfolio. If you have $100,000 portfolio and lose $50,000 in the first year, this is a 50% loss. You will need 100% gains to get it back.
Some pensions are having solvency issues. Because of this income could be cut. Many pension plans are having problems.
Taxation can be a problem. The tax laws can change and this will effect income planning. In Ontario, there were big tax changes made in August of this year.
The average length of retirement at age 65 is 20 years. Men at 65 have a life expectancy to age 83.7 and women at age 65 to age 86.7.
You should write down your lifestyle goals. You should get a bucket list, like climbing a mountain, learn to scuba dive, or take the Queen Mary around the world.
There are random acts of kindness days in November. If you are miserable before retirement, you will probably be miserable after retirement.
If you retire at age 55, you could life for 30 years until 85. You should be active and positive and plan to live until 100.
What do you expect from your nest egg? Retirees often know how much they have but not how much income they can expect. You need a Pay Cheque and a Play Cheque. The Pay Cheque is what you need to spend on fixed expenses. It is a good idea if these are covered by CPP and Pension money. You need to consider what you will spend on such as
You need to protect your retirement security. Get the facts about your defined pension plan. What is the solvency ratio? What is the wind-up valuation? How many members and what are their demographics?
You need to understand your retirement options. Will you take a monthly pension or the commuted value? Will you use the commuted value to buy an annuity? Buying an annuity will be a 100% tax free transfer as you transfer the pension liability from the pension plan to an insurance company.
There are no so subtle changes being made to pension plans. Some plans are changing to Target Benefit Plans and this could be a game changer. Mortality tables are being updated. Some plans what to take out or change COLA benefits.
You should do a review in 3 years' time from today and see what has happened both personally and financially in that time. Do you feel like you made any progress?
Look at for new tax rates. The government is also looking at changing RRIF withdrawals rates.
On my other blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
The first problem with retirement is that we could live too long. A mountain climber's goal is to reach the top and come down safety. Most accidents happen on the way down a mountain. There are two parts of retirement, accumulation and distribution. In the accumulation phase asset allocation is important. In the Distribution phase, Income Allocation is important. The problems are health, taxes and longevity.
Everyone changes in a 3 year life cycle. So focus on the next 3 years and then the 3 years after that. We need to manage risk and lifestyle risk is a concert as is longevity. Consider that 50% of people will lie beyond the standard life expectancy.
As far a health goes, we need to have assets for long term care. Two thirds of retirees over 65 will need some form of long term care. This could come from family or an institution. Institutional care can cost $3,000 to $5,000 a month.
There is a liquidity risk. The concern is that there will be no flexibility when needed. Change is constant. This can be help with a Tax Fee Savings Account. There is a risk of the death of a partner. This will cause lifestyle changes. There will also be a reduction in income. We also face a legacy risk. We may not be able to leave a legacy. We may fail to leave a lasting impression.
There are financial risks such as inflation. This causes the costs of goods to increase. The impact might be the value of our income may not keep pace with inflation. There is the financial risk of low interest rates. This can erode our capital. The impact might be that we run out of money or take more risks.
The presenters believed that fix income products are a component of a good asset allocation plan. If the market has significant loses in the first 5 years of retirement, this could deplete a portfolio. If you have $100,000 portfolio and lose $50,000 in the first year, this is a 50% loss. You will need 100% gains to get it back.
Some pensions are having solvency issues. Because of this income could be cut. Many pension plans are having problems.
Taxation can be a problem. The tax laws can change and this will effect income planning. In Ontario, there were big tax changes made in August of this year.
The average length of retirement at age 65 is 20 years. Men at 65 have a life expectancy to age 83.7 and women at age 65 to age 86.7.
You should write down your lifestyle goals. You should get a bucket list, like climbing a mountain, learn to scuba dive, or take the Queen Mary around the world.
There are random acts of kindness days in November. If you are miserable before retirement, you will probably be miserable after retirement.
If you retire at age 55, you could life for 30 years until 85. You should be active and positive and plan to live until 100.
What do you expect from your nest egg? Retirees often know how much they have but not how much income they can expect. You need a Pay Cheque and a Play Cheque. The Pay Cheque is what you need to spend on fixed expenses. It is a good idea if these are covered by CPP and Pension money. You need to consider what you will spend on such as
- Housing
- Health Care
- Transportation
- Food
- Debt
- Personal spending
- Travel
- Hobbies
- Philanthropy
- Grandkids or Adult kids. (That is you could set up a trust to pay kids $1,000 on their birthdays.)
- CPP
- Non-registered money
- RRIFs
- TFSA
- OAS
- Company pension
- Inheritance
- Part-time work
- Annuities
You need to protect your retirement security. Get the facts about your defined pension plan. What is the solvency ratio? What is the wind-up valuation? How many members and what are their demographics?
You need to understand your retirement options. Will you take a monthly pension or the commuted value? Will you use the commuted value to buy an annuity? Buying an annuity will be a 100% tax free transfer as you transfer the pension liability from the pension plan to an insurance company.
There are no so subtle changes being made to pension plans. Some plans are changing to Target Benefit Plans and this could be a game changer. Mortality tables are being updated. Some plans what to take out or change COLA benefits.
You should do a review in 3 years' time from today and see what has happened both personally and financially in that time. Do you feel like you made any progress?
Look at for new tax rates. The government is also looking at changing RRIF withdrawals rates.
On my other blog I am today writing about CCL Industries Inc. (TSX-CCL.B, OTC-CCDBF) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Friday, November 7, 2014
Money Show 2014 - Donald Dony
Donald Dony is the principal of D.W. Dony and Associates Inc. out of Victoria, British Columbia. His website called Technical Speculator is here. He provides a free newsletter. His presentation today is called "Beyond Fundamental s: How to Analyze the Markets with Economics and Key Intermarket Ratios".
Investors need to look at the big picture. Economics are important. Also the price of the US$ is important. What he will talk about is section rotation, key ratios and putting it all together.
Over the long term we need to know where we are in the stock cycle and if economics is improving or declining. Over the short term we need to know the trend in the stock market, the relative price of the US dollar (i.e. US$ index), sector rotation and the position of the US yield curve.
The current big, big picture is that the market appears to be in another 1980 to 2000 style stock cycle. This started in 2013. From 2000 to 2013 we had an up commodities cycle. When commodities are strong than stocks we have a commodities cycle. When stocks are strong than commodities, we have a stock market cycle.
When we have commodities cycles, there are bigger drops in the stock market, like 40% drops. When we are in a stock cycle, there are smaller corrections. The US$ index goes down in a commodities cycle and up in a stock cycle. US$ index (DXY) is going up and commodities are going down currently. The Base Metals Index is dropping and the US$ is going up. The same thing is happening to the price of oil.
With a Secular Stock Market Cycle you have:
The US unemployment claims trend goes in the opposite direction to the S&P500. With US GDP, there is a significant low approximately every 5 to 6 years. The next low should be in 2015. Canada gets a low GDP growth rate every 5 to 6 years also. Some GDP low growth rates are a lot lower than others. The stock market follows the GDP, so if there is a drop in GDP growth, we should have a following bear market.
The last dip in the GDP was in 2010. So we will probably have the next one in 2015 or 2016. Currently US consumer confidence is at above the 6 year average. Canadian consumer confidence is going up. US housing sales are higher than average, but not in a bubble like in 2005. The stock market looks like it did in 1980.
The 5 to 6 years business cycle is nearing completion. A shallow low is expected in 2015. The past 2 years of fall commodities prices reinforces the stock market cycle. The TSX will perform worse than the S&P 500 because it is full of resource stocks.
The consumer staples sector is starting to outperform the Consumer Discretionary sector. This is a leading indicator. We will not see new highs in the S&P 500 in the short term. A shift into consumer staples is a change in consumer spending. Consumers are buying more of what they have to buy and not what they want to buy. Fr example Metro Inc. (TSX-MRU) is a consumer staple stock and it is making new highs.
The stock market is in a secular advance. This is based on 135 years of data and the average secular advance lasts 18 years. This cycle started in 2013. The commodities cycle has ended. The US economy is expected to rebound in 2015 and this is positive for the US$.
He believes that within the secular advance, the bull market and business cycle appears to be mature. These cycles last for 5 to 6 years, so there should be a low in 2015. The TSX is expected to underperform the S&P 500 because of the commodities stocks in the TSX.
Sites that might be of interest are Trading Economics and Stock Charts.
(Note that if anyone remembers the first bear market after 1980, it was a doozy. The market fell some 50% between 1981 and 1982.)
On my other blog I am today writing about Brookfield Asset Management (TSX-BAM, NYSE-BAM) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Investors need to look at the big picture. Economics are important. Also the price of the US$ is important. What he will talk about is section rotation, key ratios and putting it all together.
Over the long term we need to know where we are in the stock cycle and if economics is improving or declining. Over the short term we need to know the trend in the stock market, the relative price of the US dollar (i.e. US$ index), sector rotation and the position of the US yield curve.
The current big, big picture is that the market appears to be in another 1980 to 2000 style stock cycle. This started in 2013. From 2000 to 2013 we had an up commodities cycle. When commodities are strong than stocks we have a commodities cycle. When stocks are strong than commodities, we have a stock market cycle.
When we have commodities cycles, there are bigger drops in the stock market, like 40% drops. When we are in a stock cycle, there are smaller corrections. The US$ index goes down in a commodities cycle and up in a stock cycle. US$ index (DXY) is going up and commodities are going down currently. The Base Metals Index is dropping and the US$ is going up. The same thing is happening to the price of oil.
With a Secular Stock Market Cycle you have:
- Extended economic or business cycles and Bull markets,
- Lower volatility (with corrections less serve and of shorter duration),
- A stable or riding US$,
- Stocks will outperform commodities and
- Low Inflation.
- Deeper stock market corrections and the stock market will move sideways,
- Great Volatility,
- Higher probability of inflation,
- Declining US$,
- Commodities will outperform stocks and
- Shorter bull markets and business cycles.
The US unemployment claims trend goes in the opposite direction to the S&P500. With US GDP, there is a significant low approximately every 5 to 6 years. The next low should be in 2015. Canada gets a low GDP growth rate every 5 to 6 years also. Some GDP low growth rates are a lot lower than others. The stock market follows the GDP, so if there is a drop in GDP growth, we should have a following bear market.
The last dip in the GDP was in 2010. So we will probably have the next one in 2015 or 2016. Currently US consumer confidence is at above the 6 year average. Canadian consumer confidence is going up. US housing sales are higher than average, but not in a bubble like in 2005. The stock market looks like it did in 1980.
The 5 to 6 years business cycle is nearing completion. A shallow low is expected in 2015. The past 2 years of fall commodities prices reinforces the stock market cycle. The TSX will perform worse than the S&P 500 because it is full of resource stocks.
The consumer staples sector is starting to outperform the Consumer Discretionary sector. This is a leading indicator. We will not see new highs in the S&P 500 in the short term. A shift into consumer staples is a change in consumer spending. Consumers are buying more of what they have to buy and not what they want to buy. Fr example Metro Inc. (TSX-MRU) is a consumer staple stock and it is making new highs.
The stock market is in a secular advance. This is based on 135 years of data and the average secular advance lasts 18 years. This cycle started in 2013. The commodities cycle has ended. The US economy is expected to rebound in 2015 and this is positive for the US$.
He believes that within the secular advance, the bull market and business cycle appears to be mature. These cycles last for 5 to 6 years, so there should be a low in 2015. The TSX is expected to underperform the S&P 500 because of the commodities stocks in the TSX.
Sites that might be of interest are Trading Economics and Stock Charts.
(Note that if anyone remembers the first bear market after 1980, it was a doozy. The market fell some 50% between 1981 and 1982.)
On my other blog I am today writing about Brookfield Asset Management (TSX-BAM, NYSE-BAM) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Thursday, November 6, 2014
Money Show 2014 - Natural Resources Panel 2
I went to a second Natural Resources Panel presentation with Christian DeHaemer (editor of Crisis and Opportunity) Nick Hodge (publisher of Capitalist Times) and Jimmy Mengel (Editor of Outsider Club). This panel was called "Diamonds in the Rough: Overlooked trends of the 2010s".
It was first noted that free emails can be obtained at Energy and Capital Outsider Club.
It was first noted that there is a population shift as the middle class is currently dying and the millennial's culture is taken over. There is a declining use in cars, but lots of bicycle riding and things like a ridesharing community. There is a birth dearth so people are buying fewer toys and cereal. People want cleaner food. This involves such companies as McDonald's Corp. (NYSE-MCD), Chipotle Mexican Grill (NYSE-CMG), Whole Foods Market (NASDAQ-WFM) and Hain Celestial Group (NASDAQ-HAIN).
Some losers will be educational stocks such as DeVry Education Group Inc. (NYSE:DV), Strayer Education Inc. (NASDAQ:STRA) and Apollo Education Group Inc. (NASDAQ:APOL). Hollywood is dying. Stocks involved are Lions Gate Entertainment Corp. (NYSE:LGF), Netflix, Inc. (NASDAQ:NFLX), Walt Disney Co. (NYSE:DIS) and IMAX Corporation (NYSE:IMAX).
People are spending a lot of hours on Google. Ridesharing sites are disruptive as is ARBNB. Housing now can be multifamily rather than single family. That is floor plans include places for grandparents. A company involved in this is Pulte Group, Inc. (NYSE:PHM).
Millennials are not buying stocks. Some 40% of them think that buying stocks is a bad idea. Millennials are not having babies. They are buying healthier food and are willing to pay for it. They have the highest level of education but also have high unemployment. Now you can educate yourself online. This is via such sites as Massive Open Online Courses.
HBO will now allow people to subscribe online. There are tobacco companies like Lorillard Inc. (NYSE:LO), Reynolds American, Inc. (NYSE:RAI) and Altria Group Inc. (NYSE:MO) and Marijuana companies. However, they think that tobacco companies will probably change into Marijuana companies.
There is an energy/commodities cycle. Will oil go to $35 to $135? The answer is probably $35. Uranium will still be needed because Japan's reactors will eventually come back online. A lot of nuclear plans are being built and this is a long term bet. Coal is not dead and it will still be around in 2030.
On my other blog I am today writing about Brookfield Asset Management (TSX-BAM, NYSE-BAM) ... continue.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
It was first noted that free emails can be obtained at Energy and Capital Outsider Club.
It was first noted that there is a population shift as the middle class is currently dying and the millennial's culture is taken over. There is a declining use in cars, but lots of bicycle riding and things like a ridesharing community. There is a birth dearth so people are buying fewer toys and cereal. People want cleaner food. This involves such companies as McDonald's Corp. (NYSE-MCD), Chipotle Mexican Grill (NYSE-CMG), Whole Foods Market (NASDAQ-WFM) and Hain Celestial Group (NASDAQ-HAIN).
Some losers will be educational stocks such as DeVry Education Group Inc. (NYSE:DV), Strayer Education Inc. (NASDAQ:STRA) and Apollo Education Group Inc. (NASDAQ:APOL). Hollywood is dying. Stocks involved are Lions Gate Entertainment Corp. (NYSE:LGF), Netflix, Inc. (NASDAQ:NFLX), Walt Disney Co. (NYSE:DIS) and IMAX Corporation (NYSE:IMAX).
People are spending a lot of hours on Google. Ridesharing sites are disruptive as is ARBNB. Housing now can be multifamily rather than single family. That is floor plans include places for grandparents. A company involved in this is Pulte Group, Inc. (NYSE:PHM).
Millennials are not buying stocks. Some 40% of them think that buying stocks is a bad idea. Millennials are not having babies. They are buying healthier food and are willing to pay for it. They have the highest level of education but also have high unemployment. Now you can educate yourself online. This is via such sites as Massive Open Online Courses.
HBO will now allow people to subscribe online. There are tobacco companies like Lorillard Inc. (NYSE:LO), Reynolds American, Inc. (NYSE:RAI) and Altria Group Inc. (NYSE:MO) and Marijuana companies. However, they think that tobacco companies will probably change into Marijuana companies.
There is an energy/commodities cycle. Will oil go to $35 to $135? The answer is probably $35. Uranium will still be needed because Japan's reactors will eventually come back online. A lot of nuclear plans are being built and this is a long term bet. Coal is not dead and it will still be around in 2030.
On my other blog I am today writing about Brookfield Asset Management (TSX-BAM, NYSE-BAM) ... continue.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Wednesday, November 5, 2014
Money Show 2014 - Natural Resources Panel
Sean Brodrick was the moderator of this panel from Fairmont Resources. The topic they addressed is called "Diverse Opportunities in the Canadian Resources Sector".
Gold is still in a bull market. We are into a disinflationary period. Commodities will be moving down. The US currency is really bad, except for all the others. The US currency is going up and this puts a downward pressure on gold. Gold is currently not responding to geopolitical problems.
As far as base metals go, he is bullish on nickel as they have been no big discoveries lately. Zinc and copper are ok. He favors zinc as supply and demand is out of whack. A big mine in Australia is closing. He also favors aluminum as there is not much in new supply.
Silver is a byproduct of zinc mining and silver is not cheap. Tahoe Resources (NYSE-THO) is a good company. Silver is not horded like gold is. As tech improves we might get more efficient in mining silver. As for Silver Wheaton Corp (TSX-SLW) he would like to see silver improve in price before buying.
As oil prices drop, Alberta oil sands will have problems. Natural gas prices are regional in Canada. Carbo Ceramics (NYSE-CRR) is a good company. As for Natural Gas, the tech to get it out of the ground is changing rapidly. Raging River Exploration Inc. (TSX-RRX) is a good company. Buy Toscana Energy Income Corp (TSX-TEI) for income as it is a boring company.
Nitrogen fertilizers will be coming down in Canada. The US will be look for more local sources for nitrogen. He does not think that phosphate plants can make a decent return in North America.
If we get into a strong disinflationary period, there could be a QE4. The panels feel that older players in the Oil Sands will be ok, but new plays are out of luck.
On my other blog I am today writing about Canadian Oil Sands (TSX-COS, OTC-COSWF) ... continue.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Gold is still in a bull market. We are into a disinflationary period. Commodities will be moving down. The US currency is really bad, except for all the others. The US currency is going up and this puts a downward pressure on gold. Gold is currently not responding to geopolitical problems.
As far as base metals go, he is bullish on nickel as they have been no big discoveries lately. Zinc and copper are ok. He favors zinc as supply and demand is out of whack. A big mine in Australia is closing. He also favors aluminum as there is not much in new supply.
Silver is a byproduct of zinc mining and silver is not cheap. Tahoe Resources (NYSE-THO) is a good company. Silver is not horded like gold is. As tech improves we might get more efficient in mining silver. As for Silver Wheaton Corp (TSX-SLW) he would like to see silver improve in price before buying.
As oil prices drop, Alberta oil sands will have problems. Natural gas prices are regional in Canada. Carbo Ceramics (NYSE-CRR) is a good company. As for Natural Gas, the tech to get it out of the ground is changing rapidly. Raging River Exploration Inc. (TSX-RRX) is a good company. Buy Toscana Energy Income Corp (TSX-TEI) for income as it is a boring company.
Nitrogen fertilizers will be coming down in Canada. The US will be look for more local sources for nitrogen. He does not think that phosphate plants can make a decent return in North America.
If we get into a strong disinflationary period, there could be a QE4. The panels feel that older players in the Oil Sands will be ok, but new plays are out of luck.
On my other blog I am today writing about Canadian Oil Sands (TSX-COS, OTC-COSWF) ... continue.
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Tuesday, November 4, 2014
Money Show 2014 - Jeff Weniger
Jeff Weniger is Investment Strategist and Portfolio Manager at BMO Private Bank in Chicago. His talk was called "Game Changers: The Coming Social and Demographic Trends That Will Change the Way you View the World and Your Investments".
We have been in an economic funk for the past 14 years. We feel it will always be this way. Isaac Asimov said in 1964 that future communications will be all sight and sound. Carlos Sims, the world's second riches person, called for a global three-day working week in July 2014. With a 3 day work weeks we would have more time to relax.
Friday seems to be a new Saturday (at the time when people worked half days on Saturday). Now it is hard to get anyone at work on Friday afternoon. Work week has gone from 39 hours to 33 hours, but we need two people to work.
Could we be seeing the end of the rat race? Could we be seeing a recession when really the life of leisure is unfolding? Work is on a downward trend line. A larger proportion of the US population took a vacation while Lehman's reeled than during the benign "Peace Dividend" of the early to mid-1990.
Travel has gone from foot to horse to car/train/bus and now perhaps to a self-driving car. Cooking has gone from manual cooking over a flame to an oven and now to a Microwave.
A child born today may see 18 years of deflation in the cost of higher education. The cost of raising children is about to collapse. College tuition is at an expense apex. For child care you cannot extrapolate to out to eternity. If you look at Day Care inflation vs income, in Texas it went from 26% of income to 58% of income. This cannot go on. When things cannot go on, they stop.
In 15 to 20 years, crude oil will be gone. The price of crude oil will collapse. The Price of solar power is collapsing. It will make crude oil obsolete. When solar becomes a force then energy and utility stocks will be hammered.
In regards to Russian Stability, only a few brave souls predicted the fall of the USSR. The Putin regime is not immune. Russia depends on crude oil to balance its budget. It will not be able to when the price of crude collapses. Exxon Mobil Corp. (NYSE-XOM) will be hit. Oil companies are in the dino business. Alberta has a 30% dependence on oil and Russian has a 50% dependence on oil.
Real Estate is going to be a problem in Canada. With the fall of the Canadian Dollar to $0.88 US, prices in Canada and US are equal on a PPP basis. Currently in the US, full time jobs are coming back.
On my other blog I am today writing about Canadian Oil Sands (TSX-COS, OTC-COSWF) ... continue. ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
We have been in an economic funk for the past 14 years. We feel it will always be this way. Isaac Asimov said in 1964 that future communications will be all sight and sound. Carlos Sims, the world's second riches person, called for a global three-day working week in July 2014. With a 3 day work weeks we would have more time to relax.
Friday seems to be a new Saturday (at the time when people worked half days on Saturday). Now it is hard to get anyone at work on Friday afternoon. Work week has gone from 39 hours to 33 hours, but we need two people to work.
Could we be seeing the end of the rat race? Could we be seeing a recession when really the life of leisure is unfolding? Work is on a downward trend line. A larger proportion of the US population took a vacation while Lehman's reeled than during the benign "Peace Dividend" of the early to mid-1990.
Travel has gone from foot to horse to car/train/bus and now perhaps to a self-driving car. Cooking has gone from manual cooking over a flame to an oven and now to a Microwave.
A child born today may see 18 years of deflation in the cost of higher education. The cost of raising children is about to collapse. College tuition is at an expense apex. For child care you cannot extrapolate to out to eternity. If you look at Day Care inflation vs income, in Texas it went from 26% of income to 58% of income. This cannot go on. When things cannot go on, they stop.
In 15 to 20 years, crude oil will be gone. The price of crude oil will collapse. The Price of solar power is collapsing. It will make crude oil obsolete. When solar becomes a force then energy and utility stocks will be hammered.
In regards to Russian Stability, only a few brave souls predicted the fall of the USSR. The Putin regime is not immune. Russia depends on crude oil to balance its budget. It will not be able to when the price of crude collapses. Exxon Mobil Corp. (NYSE-XOM) will be hit. Oil companies are in the dino business. Alberta has a 30% dependence on oil and Russian has a 50% dependence on oil.
Real Estate is going to be a problem in Canada. With the fall of the Canadian Dollar to $0.88 US, prices in Canada and US are equal on a PPP basis. Currently in the US, full time jobs are coming back.
On my other blog I am today writing about Canadian Oil Sands (TSX-COS, OTC-COSWF) ... continue. ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
Monday, November 3, 2014
Money Show 2014 - Patrick Ceresna
What Patrick Ceresna wanted to cover in this presentation are
Paper profits vs real return was the next topic. This is talking about unrealized and realized gains. Unrealized gains only demonstrate value of an investment if theoretically it was liquidated. Realized gains involve dividends, option premium income and capital gains taken. A traders needs to change paper profits into cash to make money.
The next topic was psychology in trading. Traders tend to be passionately overconfident in their predictions. They will over estimates probabilities. People tend to stay with a trade that they are emotionally invested in.
There are solutions to this. You should develop a methodology. Makes rules for taking actions and do not make it up as you go along. You should learn to trade around your position. You should utilize options to define the risks. In learning to trade around a risk, say you had Apple (NASDAQ-AAPL) and it hit a certain predetermined price, then sell 100 of your 300 shares and take some profits.
Technical analysis is no holy grail. It is a tool to be used in combination with sound risk management. You need to identify trends, to identify support and resistance levels and also identify when the price is no longer confirming the sentiment.
You should use technical analysts to see when the stock has made a symmetrical move. This is when a stock seems to take two steps forward and one back and then consolidations. The stock then two steps forward and one step back and then consolidate. Say a stock raises $20 then consolidates and then it is up $20 and consolidates. This could be a time to sell some stock. This is a time to pay attention. It may be a time to make a move to at least keep some of the gain of the last rally.
This is not an exact science. The stock may just be making a short term high. However, it may be an ideal place to take some profit.
If a stock moves in a bell type curve, on the way up buyers are in control. At the top buyers and sellers (or bears and bulls) are equal. On the way down, then sellers (or bears) are control. There are not enough buyers. You need to make money when the stock is trending high. If a stock is stuck in a band you will not make money.
If there is a change in the trend, that is there is a change to a downward trend, then it is time to get out. Using moving averages will not get you out at the top. Say you own 1,000 shares of a stock. When a top occurs sell 500. At the bottom buy 500 so you are back to 1000 shares. Never get all out, but manage the trends.
Dow Chemical (NYSE-DOW) has had an uptrend for one and one half years so you need to recognize that the trend has changed and the bull trend has stopped. Emerson Electric Co. (NYSE-EMR) has changed from a bull trend to a bear trend and so it is time to sell some.
Do not try to manage all in or all out. This is too emotional.
Learn to trade Global with the National Bank. See their website or email this link nbdbreferral@nbc.ca. This course cost $200.00.
On my other blog I am today writing about WiLan Inc. (TSX-WIN, NASDAQ-WILN) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
- Trading vs. Investing
- Paper Profits vs. Real Returns
- Psychology in Trading
- Technical Techniques for Taking Profits
Paper profits vs real return was the next topic. This is talking about unrealized and realized gains. Unrealized gains only demonstrate value of an investment if theoretically it was liquidated. Realized gains involve dividends, option premium income and capital gains taken. A traders needs to change paper profits into cash to make money.
The next topic was psychology in trading. Traders tend to be passionately overconfident in their predictions. They will over estimates probabilities. People tend to stay with a trade that they are emotionally invested in.
There are solutions to this. You should develop a methodology. Makes rules for taking actions and do not make it up as you go along. You should learn to trade around your position. You should utilize options to define the risks. In learning to trade around a risk, say you had Apple (NASDAQ-AAPL) and it hit a certain predetermined price, then sell 100 of your 300 shares and take some profits.
Technical analysis is no holy grail. It is a tool to be used in combination with sound risk management. You need to identify trends, to identify support and resistance levels and also identify when the price is no longer confirming the sentiment.
You should use technical analysts to see when the stock has made a symmetrical move. This is when a stock seems to take two steps forward and one back and then consolidations. The stock then two steps forward and one step back and then consolidate. Say a stock raises $20 then consolidates and then it is up $20 and consolidates. This could be a time to sell some stock. This is a time to pay attention. It may be a time to make a move to at least keep some of the gain of the last rally.
This is not an exact science. The stock may just be making a short term high. However, it may be an ideal place to take some profit.
If a stock moves in a bell type curve, on the way up buyers are in control. At the top buyers and sellers (or bears and bulls) are equal. On the way down, then sellers (or bears) are control. There are not enough buyers. You need to make money when the stock is trending high. If a stock is stuck in a band you will not make money.
If there is a change in the trend, that is there is a change to a downward trend, then it is time to get out. Using moving averages will not get you out at the top. Say you own 1,000 shares of a stock. When a top occurs sell 500. At the bottom buy 500 so you are back to 1000 shares. Never get all out, but manage the trends.
Dow Chemical (NYSE-DOW) has had an uptrend for one and one half years so you need to recognize that the trend has changed and the bull trend has stopped. Emerson Electric Co. (NYSE-EMR) has changed from a bull trend to a bear trend and so it is time to sell some.
Do not try to manage all in or all out. This is too emotional.
Learn to trade Global with the National Bank. See their website or email this link nbdbreferral@nbc.ca. This course cost $200.00.
On my other blog I am today writing about WiLan Inc. (TSX-WIN, NASDAQ-WILN) ... continue ...
This blog is meant for educational purposes only, and is not to provide investment advice. Before making any investment decision, you should always do your own research or consult an investment professional. I do research for my own edification and I am willing to share. I write what I think and I may or may not be correct.
See my site for an index to these blog entries and for stocks followed. Follow me on Twitter.
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