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Liquidity crisis of epic proportions?

Smallcock

Active member
Jun 5, 2009
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oil&gas

Well-known member
Apr 16, 2002
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Ghawar
What does this all mean?

This could mean no more interest hikes from BoC as
expected. It is even possible that BoC along with the
U.S. Fed and other central banks may attempt to reverse
the current trend of rising rate to avert the impending
market crash.

Just my wishful thinking. I am heavily invested in
dividend stocks. Further rate hikes is detrimental
to my portfolio.
 
I have warned against high dividend stocks for a long time since interest rate sensitive and it shows companies have nothing better to do with cash than toss it out double taxed (in the U.S.) dividends since have no better business opportunities. Bonds of course even more interest rate risky. If you have a 10-year duration you will lose about 10% in market value for every 1% increase in interest rates. Unless you just hold to maturity and receive below market interest income until then.
 

JohnLarue

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Jan 19, 2005
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Unless you just hold to maturity and receive below market interest income until then.
Well if rates rise quickly and bond prices come down, a ten year duration portfolio will suffer capital losses probably well in excess of the interest income for a negative total return
If rates do not rise quickly, it is possible cap losses may be offset by coupon payments, ie close to zero return
Assuming zero default, holding a bond to maturity guarantees a positive total return equal to the quoted yield to maturity (less commissions) when you bought the bond, regardless of rate movements

if inflation is greater than the quoted yield then your real returns are negative, but not to same extent as holding cash for the same period

Over weighting equities at this point is pretty risky
so bonds will certainly not provide the returns they have for the last 30 years, however, held to maturity they can provide a steady return without the price risk of dividend stocks
They have there place in a diversified portfolio
 
JohnLarue - Excellent additional points. I am in the U.S. where the market outlook is quite favorable with last quarter S&P500 company's coming in with 20%+ profit growth (not that I would ever recommend an index fund), The outlook for thru 2019 is double ditgit earnings growth and usually these estimate have been beat. In my view the biggest risk is Trump,. While more volatile, smaller caps may be more timely if Trump gets out of NAFTA or creates a trade war like kind of has done with Canada.

A further unknown factor for our multinational's is China is now taking over Asian leadership with the “One Belt, One Road” (OBOR) trade initiative, which takes its inspiration from the ancient Silk Road trading route. After Trump abandoned the Trans-Pacific Partnership (TPP) China, Russia and Asian nations are taking over economically in Asia.

I have not recommended bonds for a number of years but use other "participate but protect" strategies. In the U.S. we have strong upward pressure on interest rates as well as increasing inflation. The fed target of 2% inflation will probably be reached so my cloudy crystal ball says its most likely the total return in most bonds especially the "safest" if held to maturity will most likely be negative both in absoute and real terms.

U.S Govt bonds which usually other bond rates tend to follow have the issues of our HUGE GOP deficits not only for the massive tax cuts for the wealhy and corporations but then the buget busting spending bill of the GOP with yet more may come. We haven't even addressed infrastructure etc. Soon we will have $trillion ANNUAL deficts per the CBO. I don't see how interest rates can do anything but increase since we are still near historic lows.

Folks might do better with high yields since the default rate is so low, and expected to remain low. They have less interest rate risk mathematically and the higher yield is more likely to offset losses by interest rate increases.

Obviously, all have to be carefully selected which is why I use managers with a long-term track record in every sector of excess Alpha vs Beta (excess return for the risk taken)

Again this applies to the U.S. market, I have not followed what the situation is for Canadian investment outlooks.
 

betdog

Member
Aug 13, 2013
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PHL/DCA/BUF
JohnLarue - Excellent additional points. I am in the U.S. where the market outlook is quite favorable with last quarter S&P500 company's coming in with 20%+ profit growth (not that I would ever recommend an index fund), The outlook for thru 2019 is double ditgit earnings growth and usually these estimate have been beat. In my view the biggest risk is Trump,. While more volatile, smaller caps may be more timely if Trump gets out of NAFTA or creates a trade war like kind of has done with Canada.

A further unknown factor for our multinational's is China is now taking over Asian leadership with the “One Belt, One Road” (OBOR) trade initiative, which takes its inspiration from the ancient Silk Road trading route. After Trump abandoned the Trans-Pacific Partnership (TPP) China, Russia and Asian nations are taking over economically in Asia.

I have not recommended bonds for a number of years but use other "participate but protect" strategies. In the U.S. we have strong upward pressure on interest rates as well as increasing inflation. The fed target of 2% inflation will probably be reached so my cloudy crystal ball says its most likely the total return in most bonds especially the "safest" if held to maturity will most likely be negative both in absoute and real terms.

U.S Govt bonds which usually other bond rates tend to follow have the issues of our HUGE GOP deficits not only for the massive tax cuts for the wealhy and corporations but then the buget busting spending bill of the GOP with yet more may come. We haven't even addressed infrastructure etc. Soon we will have $trillion ANNUAL deficts per the CBO. I don't see how interest rates can do anything but increase since we are still near historic lows.

Folks might do better with high yields since the default rate is so low, and expected to remain low. They have less interest rate risk mathematically and the higher yield is more likely to offset losses by interest rate increases.

Obviously, all have to be carefully selected which is why I use managers with a long-term track record in every sector of excess Alpha vs Beta (excess return for the risk taken)

Again this applies to the U.S. market, I have not followed what the situation is for Canadian investment outlooks.
Dave, what funds or fund managers do you follow?

Also, what’s your take on developed and emerging market stocks, both large and small cap?
 
Dave, what funds or fund managers do you follow? Also, what’s your take on developed and emerging market stocks, both large and small cap?
I follow about 5000 and actively monitor about 150.

Due to SEC and FINRA regulations, I can not discuss anything specific here have to know individual objectives and lots of financial information. My post was designed to be very geneal and on a Canadian board where I have no jurisdiction but I have to be careful since any correspondece has to be archived etc on our business server.

However, yes I recommend emerging market opportunities but mostly not in the volatile foreign exchanges but with companies doing business in emerging markets but listed on major exchanges - London, Canadian, U.S. etc. And yes emerging smalls but only based on detailed evaluation of clients risk critera, and individual financial situation.
 
Ashley Madison
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