Financial Markets Meltdown

[Dean2]

Have had a couple of PMs asking if investing in indexes right now is a good idea, given both the TSX and S&P 500 are at all time highs. This new article by RBC happened to pop up yesterday. If you follow the link you can see all the graphs etc that go with it but here is the text part of the article.

https://www.rbcgam.com/en/ca/learn-p...d5701d82b31032

Sometimes markets seem to race from one high point to the next. At times like these, investors may face what some refer to as ‘psychological barriers to entry.’ They may question whether it’s the best time to put new money into the market. After all, investing at all-time highs means paying a price that no one has ever paid before – creating a seemingly guaranteed recipe for regret.

This kind of thinking is linked to trying to time the market. Investors who do this try to avoid market highs and buy at market lows. But timing the market is almost impossible to get right. And, all-time highs are not uncommon – so you would be missing out on a lot of opportunity if you tried to avoid them.

In fact, since 1950 the broad U.S. equity market has set 1,250 all-time highs along the path to its current level. That’s an average of over 16 every year.
S&P 500 all-time highs by decade
sp 500 all time highs by decade

Source: Bloomberg, RBC GAM. Data as of January 1, 1950 to March 2024.
What do market highs mean for investors?

New market highs are not as meaningful as some people may think. Often they have to do with continued growth of the economy and corporate profits. While there are periods of time when the economy and markets slow down, over time improvements in productivity and innovation have continued to propel markets towards new highs. This can generate strong long-term results for investors, as long as they stay invested.

Here’s how you would have done if you had invested only at all-time highs in the S&P 500 Index from 1950-2023. Some would consider this the “worst” possible time to invest. But the chart shows your returns would be close to the average return of the index for one, two- and three-year periods:
Investing at all-time highs vs. all-dates
All time high new chart jpg EN.JPG

Source: Bloomberg, RBC GAM. Data for S&P 500 as of January 1, 1950 to March 2024. All-dates refers to rolling 1-, 2- and 3-year returns starting from each trading date during this time. Returns in U.S. dollars. An investment cannot be made directly into an index. The graph does not reflect transaction costs, investment management fees or taxes. If such costs and fees were reflected, returns would be lower. Past performance is not a guarantee of future results.

What’s more, this chart covers some of the worst times in the stock market. This includes Black Monday (October 1987), the Tech Wreck of the early 2000s and of course the global financial crisis of 2008.

Nevertheless, when markets are sitting near all-time highs, many investors still can’t help but feel a bit uneasy about putting new money to work. Some investors make the decision to remain in cash and wait for a large correction before they invest. However, often times a significant correction never comes, leaving the investor with the regret of missing out on investment returns.
How often does a big correction follow a market high?

For long-term investors who are skeptical about investing in this environment, it may be helpful to know just how rare market corrections from all-time highs have been. The charts below show how often the S&P 500 Index has finished down greater than 10% over various periods of time, following each of the 1,250+ all-time highs since 1950.
How frequent are market corrections following all-time highs?
how frequent are market corrections following all time highs

Source: Bloomberg, RBC GAM. Data as of January 1, 1950 to March 2024, in U.S. dollars.
Key takeaways:

Looking out just one year from each all-time high in the S&P 500, market corrections greater than 10% have occurred only 9% of the time.
As we extend the time horizon, market corrections become even rarer. In fact, the S&P 500 has never been down by more than 10% at the end of a 10-year period following any of its all-time highs since 1950.
Long-term investors have the advantage of an extended time horizon. Staying invested can help them stick to their financial plan.

Time provides perspective for long-term investors

There’s no way of knowing what lies ahead in the near term. What history tells us is that stocks tend to move higher over the long term. New highs are a normal occurrence and don’t necessarily warn of an impending correction. They may in fact signal that further growth lies ahead.

[Dean2]

I am generally NOT a fan of any of the analysts that appear regularly on BNN. I won't go into detail about why as it would be ver y uncomplimentary but I will say, look at the performance of their top picks and the funds they run. Also, look at the top picks made by about half the guests where neither them or their family own any stock in their recommended companies. Can you say pimp and dump.

However happened to have market call on while i was doing something else and I have to say that todays guest actually stood out as an excellent analyst. Good view, fair analysis and a very good longterm view of the companies she is talking about. I would hire or work with her any time. If I was still in the business, I would outright steal her from Newhaven. I am going to do a little digging on Newhaven and the portfolios she runs.

Rebecca Teltscher's Top Picks

Rebecca Teltscher, portfolio manager at Newhaven Asset Management, discusses her top picks: Pembina Pipelines, BCE, and Northland Power

[Map Maker]

One thing to note is that dividends are at an all-time high pretty much across the board.
Take TD for instance:
Currently it’s at 5.5% yield.
I’ve owned TD since I began investing over 20 years ago. Its dividend has always been about 3.1%.
I do believe this is all due to inflation and interest rates.
I think when interest rates go down, the dividend yield will follow the GIC rate and will get back down to 3%.
For this to happen, TD stock price should rise to about $120. Which is about 60% gain which should happen in the next 8 or so years. I feel all these high dividend blue chip stock will do the same.
Theoretically of course

[Map Maker]

National bank is buying out Canadian Western bank for double what its shares are worth. Glad I held all my shares.

[Dean2]

Originally Posted by Map Maker

National bank is buying out Canadian Western bank for double what its shares are worth. Glad I held all my shares.

Congratulations.

National's offer to buy at what is basically book value is a very fair offer, and anyone holding the shares would have had to wait a very long time to see CWB's share price hit +50 in the absence of the buyout. I really can't see any shareholder voting no, especially with both Boards recommending the sale. The Federal Government's reaction is a lot more uncertain, National having their head office in Montreal bodes well for this being approved, especially if the Fed see this as some sort of shafting the West at the same time. If Smith complains a lot, I think it helps the chances of this being approved, but it is really hard to predict what that bunch of thieving, lying, scumbag bandits in Ottawa are going to do on any given day.

Conratulations to all the folks holding CWB, especially if you bought them under $23. It is always great to get lucky every once and a while.

[tranq78]

Originally Posted by Dean2

If Smith complains a lot, I think it helps the chances of this being approved, but it is really hard to predict what that bunch of thieving, lying, scumbag bandits in Ottawa are going to do on any given day.

Dean, can you be more clear how you really feel about our federal government?

[Dean2]

Originally Posted by tranq78

Dean, can you be more clear how you really feel about our federal government?

I tried to, but all it came out as was ****, ********, *********, ***, ****.

[jstubbs]

CWB: Great deal for shareholders; sad day for Western Canada. Especially Edmonton, who has few major corporate HQs left.

[Twisted Canuck]

[Glion]

Just wondering peoples thoughts on NVO? Thats Novo who make the drug ozempic that is trending to be the highest grossing drug in history?

[Fisherdan]

Originally Posted by Glion

Just wondering peoples thoughts on NVO? Thats Novo who make the drug ozempic that is trending to be the highest grossing drug in history?

They have done a great job of trimming the fat.

[Dean2]

For those of you looking for high dividend yields in beat down sectors, Utilities, Communications and specific stocks in pipelines and Banking have been pushed down a LOT over the interest rate increase cycle and for company specific reasons. Telus, is back to its Pandemic lows, and 2016 levels, but is paying out much higher dividends, so currently yielding 7.5%. BCE has been beat down even further, trading below its pandemic bottom and yielding 9.25%, however that high a yield is also a warning sign. While I view the Telus dividend as unlikely to be reduced, the market does not feel the same about BCE. Hard to pick a bottom for either but good candidates to watch for leg in opportunities.

Same applies in the utilities space Canadian Utilities, CU, 6.1%, EMA 6.3%, AQN 7.25.

In the oil and gas Royalty realm, no debt, no operating risk, FRU 7.89%. Pipeline, TRP is well off its previous highs and yielding 7.25%.

TRP, AQN and TD seem to show signs they already have bottomed and I have been slowly legging into them. The other stocks I am watching and will start slowly acquiring once they show sings of bottoming.

HXS does not pay a dividend but being based on the S&P 500, it is up 28% over the past 12 months.

I am not a believer in sell in May and go away. The lower trading volumes over summer often create nice buying opportunities. Good luck to all and have a great summer.

Recent Research on Emera

Scotia - Sector outperform PT $52
Latest Research (June 28, 2024): OUR TAKE: Neutral. Emera announced a strategic reallocation of capital which includes: 1) a move down of the dividend growth rate (which we expected), 2) an introduction of 5%-7% EPS growth guidance (our estimates are slightly below the mid-point), and 3) an extension of its existing 7%-8% rate base growth guidance to 2029 (expected). There is no change to the existing dividend.Management reiterated that its second asset sale process remains ongoing, which we think relates to New Mexico Gas. We do not believe that today’s announcement has any read through to the status or eventual outcome of the asset sale process. Instead, we believe management and the Board considered the new dividend growth rate material enough to warrant immediate disclosure. While management previously noted that it expected having clarity on asset sales by the end of June, it is not terribly surprising that a process could take longer than expected. Our estimates do not materially move. Emera is trading at 14.1x 2025E P/E versus Fortis at 15.9x and Hydro One at 19.9x. We consider the shares to be attractively valued and believe they could react positively to an asset sale announcemen

[Dean2]

Just to be clear, becasue it isn't in my previous comment, I did add some BCE and Telus back in April and May this year, but I was early to the party, they were far from bottoming. The dividend is very strong but it doesn't offset what the share price has dropped, so now I am waiting for a sustained up swing before adding any more.

Like I have said repeatedly, it is nearly impossible to time a market bottom, however it is a bit easier to find the bottom and recovery on individual stocks. Don't always get that right either but it is a least a BIT easier. The good thing is, by sticking to the top one or two names, and only investing in QUALITY companies, they will eventually recover.

[Map Maker]

I agree it is a wacky market with huge blue chips paying over 7% and not in distress.
I too have bought T,TD , BCE and TRP recently. I’m sure over time they will prove to be good buys but still hard to do as they all need to be restructured in some way.

MAMAA stocks are all at an all time high which is great but now worry about a bubble.

[Twisted Canuck]

Originally Posted by Dean2

Just to be clear, becasue it isn't in my previous comment, I did add some BCE and Telus back in April and May this year, but I was early to the party, they were far from bottoming. The dividend is very strong but it doesn't offset what the share price has dropped, so now I am waiting for a sustained up swing before adding any more.

Like I have said repeatedly, it is nearly impossible to time a market bottom, however it is a bit easier to find the bottom and recovery on individual stocks. Don't always get that right either but it is a least a BIT easier. The good thing is, by sticking to the top one or two names, and only investing in QUALITY companies, they will eventually recover.

That's the key thing, investing in well managed quality companies, with reasonable P/E ratio and good dividends. Great if your timing is perfect when you buy in, but even if it's not you'll come out well ahead in the long run.

[Fisherdan]

A couple thoughts, questions.

Where do you guys park cash? I currently am using CBIL (Horizons 0-3 months Canadian t-bills).

Thoughts on the Canadian dollar… Is currency forecasting a complete fools game? The sentiment is off the chart bearish for CAD right now. A contrarian might say that maybe there are too many people on that side of the boat right now.

I’m a little bit nervous about markets going forward. I bought HXS a year ago… that has been such a winner. But with less and less stocks driving it (all AI), and unreasonable PE ratios, maybe it’s time to trim and find something a little more defensive. It is tough to square in my head, that after all the rate hikes, and wicked consumer debt, that the US will not have a slowdown or recession. Maybe I’m wrong. But I like that you mentioned utilities, Dean. That is something I need to think about.

A few companies I like:

ATD - couche-tard: amazing track record. Always growing. IMO the circle k stores are always top notch, and their Frosters are superior to Slurpees!

TFI international: Top shelf trucking company. constantly acquiring and growing. On the other hand, a high PE ratio, and not sure how it will fare if the US consumer slows down.

TVK - terravest industries : interesting small cap that has been growing and growing, and is just starting to get institutional recognition. It’s done super well, but has been correcting a bit lower the last couple months. It is a small cap though, so a lot can happen (up or down).

And for non-serious tinfoil hat discussion: if I was Putin, I’d call up MBS and restrict oil supply a bit. Nothing too obvious, but enough to get prices up to about $100 or so. Give sleepy Joe and the Democrats the last little shove needed to guarantee they are history in November.

[Dean2]

Cash I park in the self trading savings accounts. At the Royal, RBF2010 for Canadian, RBF2014 for U.S. They pay 4.3% and 4,8% respectively. Every self trading account has one so at TD I uses TBD8155. Same interest rate. Works exactly like any savings account, rates go up and down but at least they pay a lot better than a bank savings account.

I have already recently posted my thoughts on the Canadian dollar so will leave it to others to post their thoughts..

[slough shark]

Just trying to get other opinions, full disclosure I work for a gold mining company (agnico eagle) but it looks like gold is getting set to make another bit of a run, (we are into the interest rate cutting part of the cycle here in Canada and US likely starting shortly) just wondering what guys have for their target for prices there? I’m already fairly heavily invested in gold related stuff due to company share program but I’m curious what people are thinking. Gold these days seems to be a bit of a laggard (1-2 years behind)but being more accurate in the inflation number marker. CPI has been a flawed and underestimated indicator imho and we haven’t been given the actual inflation number for years. According to cpi numbers we’ve only had inflation of around 15% give or take the last 4 years cumulatively but I have a hard time finding much of anything that’s gone up anywhere close to that number, it seems the price of everything is up 30+% with a lot of critical expenses up a lot more.

[longshot270]

CASH.TO is an option to park your cash in. Paying around 5%, and isn't locked in.

[Outbound]

Originally Posted by longshot270

CASH.TO is an option to park your cash in. Paying around 5%, and isn't locked in.

That's where I keep my emergency fund and medium range savings for high dollar things like a boat.

Since I have the room, I do it within my TFSA.

[tranq78]

Originally Posted by Fisherdan

A couple thoughts, questions.



Where do you guys park cash? I currently am using CBIL (Horizons 0-3 months Canadian t-bills).


.

Warning. Long response.

I will jump in. Do this. Just buy a Treasury bill diectly via your discount broker. Get rate certainty and buy a 1 year bill. As of Thursday a 1 yr bill is 4.35%. 1-3 month tenors are higher at 4.4-4.65%. No, not a typo. Short rates way higher than 1 yr rates.

Those were the real, actual rates last week. I am sitting in Pearson Airport right now, so can't see today's rates.

Nothing is lower risk than a T-bill. Pure, direct AAA GoC debt with no liability limit (like GIC's). Before anyone shrieks "but Trudeau", keep in mind you and your parents are all happy with term deposits or GIC's, which have CDIC g'tee up to only $100K. Oh, and CDIC is likely insolvent, and it is an INDIRECT GoC obligation, being a g'tee. So a T-bill is less complicated, lower isk.

With a T-bill there is no liability limit and there is no insolvent entity providing the gurantee for your CD or deposit.

If you need some or all of your money before maturity, just sell some or all, your choice. With a T-bill you get to KEEP all the ACCRUED interest up to sell date. Settlement is t+1 so basically immediate.

Compare this with : 1 yr RBC GIC with >4.5% offer will force you to forfeit interest if you cash out early. A 1 yr redeemable RBC GIC is 3%, so way lower return than a T-bill.

Oops, I just let slip how a bank funds a 1 year 3% redeemable deposit. They buy a 1 yr T-bill for 4.35% and give you a 3% GIC, they keep the extra 1.35% for themselves. Hush now, no tattling. It's one if banking's dirty little secrets on deposit funding.

Finally there is a matter of control. You know EXACTLY what you have with a T-bill. Buy a money market fund or M/M ETF and you have no control over what you own. Remember, the manager needs to be paid via MER and I can tell you for a fact that getting 5% or higher means the mgr is taking on riskier money securities -- acceptances, commercial paper, bank paper. If a zero risk 1 yr T-bill is yielding 4.35%, an acceptance or C/P must offer more. I am not going into R1 vs R3 on an outdoorsmen forum. My message is you always want lower risk and more control in any type of investing. And when the price of something lower (zero!) risk is not much more than other money market instruments, you need to run (don't walk) to T-bills. Plus I suggest you lock in rate certainty with a 1 year term -- you don't get rate certainty for 1 year with high interest rate savings accounts or money funds/ETFs.

Don't think anything can go wrong with C/P or GICs? Well suggest you research Home Capital deposits (pre Buffet bailout) and ABCP (asset backed C/P). All made in Canada disasters. So go to your favorite discount broker and get a T-bill.

Rant over.


Sent from my SM-G781W using Tapatalk

[Twisted Canuck]

Good info tranq.

Now if I only had money to park....

[Dean2]

Originally Posted by tranq78

Warning. Long response.

I will jump in. Do this. Just buy a Treasury bill diectly via your discount broker. Get rate certainty and buy a 1 year bill. As of Thursday a 1 yr bill is 4.35%. 1-3 month tenors are higher at 4.4-4.65%. No, not a typo. Short rates way higher than 1 yr rates.

Those were the real, actual rates last week. I am sitting in Pearson Airport right now, so can't see today's rates.

Nothing is lower risk than a T-bill. Pure, direct AAA GoC debt with no liability limit (like GIC's). Before anyone shrieks "but Trudeau", keep in mind you and your parents are all happy with term deposits or GIC's, which have CDIC g'tee up to only $100K. Oh, and CDIC is likely insolvent, and it is an INDIRECT GoC obligation, being a g'tee. So a T-bill is less complicated, lower isk.

With a T-bill there is no liability limit and there is no insolvent entity providing the gurantee for your CD or deposit.

If you need some or all of your money before maturity, just sell some or all, your choice. With a T-bill you get to KEEP all the ACCRUED interest up to sell date. Settlement is t+1 so basically immediate.

Compare this with : 1 yr RBC GIC with >4.5% offer will force you to forfeit interest if you cash out early. A 1 yr redeemable RBC GIC is 3%, so way lower return than a T-bill.

Oops, I just let slip how a bank funds a 1 year 3% redeemable deposit. They buy a 1 yr T-bill for 4.35% and give you a 3% GIC, they keep the extra 1.35% for themselves. Hush now, no tattling. It's one if banking's dirty little secrets on deposit funding.

Finally there is a matter of control. You know EXACTLY what you have with a T-bill. Buy a money market fund or M/M ETF and you have no control over what you own. Remember, the manager needs to be paid via MER and I can tell you for a fact that getting 5% or higher means the mgr is taking on riskier money securities -- acceptances, commercial paper, bank paper. If a zero risk 1 yr T-bill is yielding 4.35%, an acceptance or C/P must offer more. I am not going into R1 vs R3 on an outdoorsmen forum. My message is you always want lower risk and more control in any type of investing. And when the price of something lower (zero!) risk is not much more than other money market instruments, you need to run (don't walk) to T-bills. Plus I suggest you lock in rate certainty with a 1 year term -- you don't get rate certainty for 1 year with high interest rate savings accounts or money funds/ETFs.

Don't think anything can go wrong with C/P or GICs? Well suggest you research Home Capital deposits (pre Buffet bailout) and ABCP (asset backed C/P). All made in Canada disasters. So go to your favorite discount broker and get a T-bill.

Rant over.


Sent from my SM-G781W using Tapatalk

I agree, T-Bills are the safest option. Everything you say is accurate and well laid out. They however are not as convenient as a HISA (High Interest Savings Account) though and for holding spare cash short term I still use the HISA. I have a LOT more money tied up in RBC shares than I have in the HISA. IF RBC defaults and can't cover the cash in the HISA I have a WAY bigger problem, and so would the rest of the stock market, for that matter.

[4570]

Originally Posted by longshot270

CASH.TO is an option to park your cash in. Paying around 5%, and isn't locked in.

Searched the Globe and Mail
And this came up

GX High Interest Savings ETF
Instrument Symbol
(CASH-T)

This the one longshot?
I will look into...

[tranq78]

Originally Posted by Twisted Canuck

Good info tranq.



Now if I only had money to park....

Lol. You'll have to go back to work if inflation keeps running! Fortunately for your biz the feds have promised to build housing for everyone.

Unless of course you rebalanced your account to dividend growth. You know I've been pounding the table on that.

Sent from my SM-G781W using Tapatalk

[Twisted Canuck]

Originally Posted by tranq78

Lol. You'll have to go back to work if inflation keeps running! Fortunately for your biz the feds have promised to build housing for everyone.

Unless of course you rebalanced your account to dividend growth. You know I've been pounding the table on that.

Sent from my SM-G781W using Tapatalk

My company is officially rolled up as of June 30th, my fiscal year end. Done. If I go back to work, I'm gonna have to learn to smile and say Welcome to Walmart, I love you...Welcome to Walmart...'

Or maybe Costco. I can dream.

[Dean2]

Originally Posted by Twisted Canuck

My company is officially rolled up as of June 30th, my fiscal year end. Done. If I go back to work, I'm gonna have to learn to smile and say Welcome to Walmart, I love you...Welcome to Walmart...'

Congratulations. You will love being retired and doing exactly what you feel like doing.

[tranq78]

Originally Posted by Dean2

I agree, T-Bills are the safest option. Everything you say is accurate and well laid out. They however are not as convenient as a HISA (High Interest Savings Account) though and for holding spare cash short term I still use the HISA. I have a LOT more money tied up in RBC shares than I have in the HISA. IF RBC defaults and can't cover the cash in the HISA I have a WAY bigger problem, and so would the rest of the stock market, for that matter.

You know what you are doing. You understand time risk, liquidity, and counterpaty risk in money instruments.

Many people are lacking in finance knolwedge, this is completely the fault of education system. To them, I am trying to make the point of KISS. This will be hugely beneficial to most people parking cash. Lock in a good rate for 1 year, and can cash out some or all early and keep interest earned to that date. Sleep well at night. If a person can set up a self directed account, a person can do this.

Rule #1 for cash. Don't screw around with it.

Rule #2 for cash. See rule #1.

Sent from my SM-G781W using Tapatalk

[tranq78]

Originally Posted by Twisted Canuck

My company is officially rolled up as of June 30th, my fiscal year end. Done. If I go back to work, I'm gonna have to learn to smile and say Welcome to Walmart, I love you...Welcome to Walmart...'



Or maybe Costco. I can dream.

Well congrats!

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[KGB]

Originally Posted by Twisted Canuck

Good info tranq.

Now if I only had money to park....

I think I know the ways around that problem for you, lol!