don't disagree they overextended loans and you see that with the provision for credit losses (td being the largest).
but I think it's insanity to bet a big Canadian bank to go under, but, at the end of the day, your money.
TD Bank stock heavly shorted - is this the end ?
- Thread starter dutchcock29
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but I think it's insanity to bet a big Canadian bank to go under, but, at the end of the day, your money.
lol it would be exciting to me
and the book.... oh right, now it rings a bell...LTCM , run by Merton and Scholes
used Russian tbills as a proxy for the risk-free rate in their modelling and eventually got big with a pressure to continuously make high returns. They had to resort to high-risk, leveraged strategies--"picking up pennies in front of a steamroller."
recently watched Merton in a relatively new interview. he explains why its difficult to beat the market (especially if you're John Q) starting at 4:55 and how growth stocks are essentially options (ie call optione) at 2:12:21
So much I might say, mention, talk about. Would need way too much bandwidth and not enough time..
Long term capital.
Smart guys, veritable geniuses…..They took it on the chin.. and it almost triggered a global collapse in the 90s
Leverage..
a wonderful tool when you know what you’re doing..can crush anyonetoo when things go south….and it’s happened many times.
models.
We can hire and pay the brightest rocket scientist as quants out of western, others. We can have all the information….(HFT). We can have all the ratios, all the formulas, we can understand VAR, Capital at risk. Betas. If we are sophisticated enough, don’t have the capital, credit lines, ( mine were typically 800m with each of the sched As), if we don’t have ISDA, swaps…..there’s forwards, and futures. We can simply long call/short put…and on and on. Plenty of places take it on the chin….
But there are always those who think they know better…..
Over my career I worked with some seriously smart people. Few of us. Play the markets with our own capital…why? We know better…..
I’m not trying to be snide or anything. It just is what it is…
Most investors hobbyist, don’t even understand volume, liquidity (Merton touched on it) how deep order books are...
Assuming you were around for 2008.we saw it coming in 2006. Started reducing our risk to MBS/ABCP….then it started in 2007..most of the world thinks it started in 2008…..hint hint…
And it sent shock waves around the world…
But hey Johnny Q……
Also not talked about enough, while many call it the financial crises. What it really was, became was a credit crunch……credit and liquidity dried up…Debt makes the world go round…
If one of our big As takes a hard enough hit.
nope, don’t want to be around. It could ( I think would) , wipe out just about everyone…including Johnny Q
en.m.wikipedia.org
Long term capital.
Smart guys, veritable geniuses…..They took it on the chin.. and it almost triggered a global collapse in the 90s
Leverage..
a wonderful tool when you know what you’re doing..can crush anyonetoo when things go south….and it’s happened many times.
models.
We can hire and pay the brightest rocket scientist as quants out of western, others. We can have all the information….(HFT). We can have all the ratios, all the formulas, we can understand VAR, Capital at risk. Betas. If we are sophisticated enough, don’t have the capital, credit lines, ( mine were typically 800m with each of the sched As), if we don’t have ISDA, swaps…..there’s forwards, and futures. We can simply long call/short put…and on and on
. Plenty of places take it on the chin….But there are always those who think they know better…..
Over my career I worked with some seriously smart people. Few of us. Play the markets with our own capital…why? We know better…..
I’m not trying to be snide or anything. It just is what it is…
Most investors hobbyist, don’t even understand volume, liquidity (Merton touched on it) how deep order books are...
Assuming you were around for 2008.we saw it coming in 2006. Started reducing our risk to MBS/ABCP….then it started in 2007..most of the world thinks it started in 2008…..hint hint…
And it sent shock waves around the world…
But hey Johnny Q……
Also not talked about enough, while many call it the financial crises. What it really was, became was a credit crunch……credit and liquidity dried up…Debt makes the world go round…
If one of our big As takes a hard enough hit.
nope, don’t want to be around. It could ( I think would) , wipe out just about everyone…including Johnny Q
2007–2008 financial crisis - Wikipedia
en.m.wikipedia.org
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So much I might say, mention, talk about. Would need way too much bandwidth and not enough time..
Long term capital.
Smart guys, veritable geniuses…..They took it on the chin.. and it almost triggered a global collapse in the 90s
Leverage..
a wonderful tool when you know what you’re doing..can crush anyonetoo when things go south….and it’s happened many times.
models.
We can hire and pay the brightest rocket scientist as quants out of western, others. We can have all the information….(HFT). We can have all the ratios, all the formulas, we can understand VAR, Capital at risk. Betas. If we are sophisticated enough, don’t have the capital, credit lines, ( mine were typically 800m with each of the sched As), if we don’t have ISDA, swaps…..there’s forwards, and futures. We can simply long call/short put…and on and on
But there are always those who think they know better…..
Over my career I worked with some seriously smart people. Few of us. Play the markets with our own capital…why? We know better…..
I’m not trying to be snide or anything. It just is what it is…
Most investors hobbyist, don’t even understand volume, liquidity (Merton touched on it) how deep order books are...
Assuming you were around for 2008.we saw it coming in 2006. Started reducing our risk to MBS/ABCP….then it started in 2007..most of the world thinks it started in 2008…..hint hint…
And it sent shock waves around the world…
But hey Johnny Q……
Also not talked about enough, while many call it the financial crises. What it really was, became was a credit crunch……credit and liquidity dried up…Debt makes the world go round…
If one of our big As takes a hard enough hit.
nope, don’t want to be around. It could ( I think would) , wipe out just about everyone…including Johnny Q
2007–2008 financial crisis - Wikipedia
Curious, what are your thoughts on the current economic situation? If you saw the 08 financial crisis in 06, I am interested, what do you think will happen the next few years?
Nobody really knows, bro.
Practically everyone (if not everyone) here thought the markets would continue to go down in 2023 due to rising rates, inflation, recession, and bank failures, but it has done the complete opposite and, as expected, most retail aka "dumb money" have missed the rally. Yes, you might be getting a guaranteed 5% on your GIC or MMKT fund, but adjusted for inflation, your return in real terms isn't much.
People overstimate the probability of a crash; negative news about the economy and markets affect people more than positive news; and crashes (and bubbles) are rare. As I've mentioned in another post, retail tend to think the probably of a crash within the next 6 months, regardless of what state the market is in, is 10 to 20 percent! It's actually around 2 percent that a crash can happen (based on research from the professor in the video below).
Even better news, booms occur way more often than busts, and thus it's time IN the market, not timing it.
I wouldn't listen to people on this board; look at the people who've actually done painstaking research. For instance, watch the following video, in particular, from the 46:00 minute mark to 1:06:00 mark. (It's only about 20 minutes and if you're able to absorb info when people speak quickly, play it at 1.5x to 2x speed, which is often what I do as it saves time if you're able to keep up).
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I rarely listen to people online, as they've usually been wrong, especially youtube gurus, but i was curious his thoughts since he knew about the 08 crash in 06.
I am new to finance to be honest, I was a computer science major, I made enough to retire quite young so I've been studying finance to mange my money.
It's true that real rates, after inflation are barely positive, but GIC still better than holding cash in my opinion. Thats where most of my money is, a few small positions on some growth stocks that I am familiar with (engineering wise) and also a few puts in some stocks that in my opinion are just bubbles, i.e C3AI
I can't risk much since the money I have is meant to last the rest of my life, so GIC's was my safe haven
anything is better than pure cash at this point.
without really know your situation clearly, in general, keep enough in liquid assets to meet your living expenses , and rest in low-cost index funds.
the rational reminder podcast is a good channel where they interview academics.
in the end, the message is really just invest in low cost index funds as frequently and as much as possible... ofc, what's the the fun in that, right , even if this optimal ? then set aside some "gambling" money (ie money you can afford to lose) and hope yorue right
Interesting, would you consider index funds right now? Seems a bit, risky buying in near the top, average returns on s&p is around 7-10% right? So all that risk for an extra 2-5% on the year vs GIC
without getting too boring. When you short equity. You go long cash, you also need to collateral to cover the borrowed equity. You also are paying the borrowing rate. So the cash from the shorts is used to buy things lenders wiill accept as collateral. That could BAs, BDNs, treasuries, ABCP. But not all ABCP, it depended on the issuer, and what assets were backing it. Under the swap agreement Wes also have to pay a rate. Say prime. Around that time the ABCP I could use as collateral was paying me prime + 40 basis points. Issuers made them attractive. So a tidy profit was made by using the cash, to buy stuff to collateralize the loans and earn a rate of return. BAs, BDNs might have been paying prime plus 5 basis points. That’s what we call juice.
2006
long Roughly 1Billiom ABCP being used as collateral to cover roughly $6,000,000,000 in short equity.
That paid a premium for people to buy, because it was tied to riskier assets ( like mortgages and what not)
In essence it got to the point the risk wasn’t worth the reward. Most people knew or understood allowing people to buy houses with nothing down, of questionable income. Not a good idea. They can just walk away…
That’s the essence of it.
So by the time Lehman brothers went tits up in 2008. The snowball had been rolling. I have no idea what Lehmans brothers books looked like. I do know they too, like all players use a ton of derivatives to hedge risk. So they are now bankrupt. Unable to meet payment obligations for billions, tens of billions in various swaps ( plus what ever else). They also can’t cover their shorts[ anymore, nor will any lenders easily return the collateral they are holding against those shorts. Because in days, weeks a few months it will mature and be worth face value…
So let’s just say Lehman is A. They have a swap with B, they borrow from C.
They are in default. Need to get collateral back from C, to sell it, so they can buy equity, to repay the loans……they also have other obligations…
But B has swaps and obligations with both C and D. C has lent Lehmans 20 billion, but C also has Swaps with D and E. And they have to make good on their obligations. E also is exposed to Lehmans A. And has obligations to B, D and M…M is exposed to C, F, and B. F is exposed A, T and B, and that massive birds nest can’t be unraveled…
and the snowball explodes globally. Not hard to see the risk, when your in the business.
And that’s also why it became a credit crunch. No one willing to lend to much of anything to anyone all of a sudden……including companies that need to replace fleets, companies that were thinking about expanding plants, and so on…
that’s the essence of it.
Again, “when genius failed” while not exactly the same can explain it better than I can.
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As for recommending anything. I won’t venture down that road. I played with my companies capital. It’s your money not mine to play with.
The only thing I might suggest but this is all rudimentary. Stuff you already likely know.
TFSA before RRSP
ETF before MF
Some precious metal ( natural hedge against inflation usually)
Sched A and similar for better dividend yield. Double down using drips.
the rest…it’s your money, not mine to gamble with.
The only thing I might suggest but this is all rudimentary. Stuff you already likely know.
TFSA before RRSP
ETF before MF
Some precious metal ( natural hedge against inflation usually)
Sched A and similar for better dividend yield. Double down using drips.
the rest…it’s your money, not mine to gamble with.
dr
in response to what I bolded, if you have a long time horizon, that shouldn't matter , and the way you're talking is what that professor Goetzemann's research is about (thinking a crash is gonna happen sooner rather than lster)...I suggest you watch the video again if you have already
extra 2 to 5 percent ? spx is up 15 percent YTD, for instance...again, if you're long term, don't worry about buying at the top
XEQT
in response to what I bolded, if you have a long time horizon, that shouldn't matter , and the way you're talking is what that professor Goetzemann's research is about (thinking a crash is gonna happen sooner rather than lster)...I suggest you watch the video again if you have already
extra 2 to 5 percent ? spx is up 15 percent YTD, for instance...again, if you're long term, don't worry about buying at the top
Why short equity when you can hedge with puts? Theta decay? If you were short in 06 it was a tad early, similar to burry
Also, what you just described to Lehman is similar to the situation now, no? Also you mentioned TD could hedge risk, yet you said Lehman hedged risk but it ended up failing? I never read into Lehman, but you're saying they were short, curious why they didn't use securitized loans or CDS to hedge?
Right now I know plenty of people who got mortgages with minimum wage by moving their cash around a bit (which was taught by the bankers) in order to get approved for mortgages, can't say I know a bunch in default, except one who was foreclosed. Of course this was all at TD bank. Plenty of repo's
Believe me I won't be just allocating my money because a stranger said so online, but I am curious your thoughts considering you saw the 08 financial crisis in 06.
The smartest people I know (way wealthier than I will ever be) have only been buying GIC's/bonds.
Originally this was the conclusion I came to, that the best method of investing was to just buy an index fund and hold it long term when I first started in finance, I mean warren buffet reccomends it. That being said, after talking to some fairly intelligent individuals (several ex-hedgefund owners) they told me although this has been true in the past, in terms of the US stock market going up continuously, this isn't actually what has to happen in the future, i.e other countries stock markets have gone down and never recovered.
the 15% YTD is a one year snapshot though, I meant 7-10% returns (on average) i.e if you took the past 2 years you'd actually still be negative.
So with GIC's offering 5%, it's quite enticing to take that 0 risk return vs trying to get a 7-10% return (2-5% extra on top of the GIC rate with more risk), but to each their own.
Short answer. More people that think they know more than pros. If it were that simple and easy. Wouldn’t every financial institution in the world so just do that? Would the OTC derivatives market be worth 600 Trillion? A swap is a mega contract between two party’s whose underlying value is derived from A and B. An equity swap. One party receives ( or pays) the the capital appreciation from a single stick, or an index in return they pay/rec. interest. Could be prime or LIBOR or..
Hence the need to short 100million or 500mm depending on the swaps value.
I can’t explain some of the most complex financial vehicles in layman’s terms. Can a Quantum physicists? ( it’s not near that) but…
Long answer.
Read.
Swap Derivatives and Their Role in Corporate Finance - dummies
Of the four most common derivatives, the swap is easily the most confusing. Why? Because each swap involves two agreements rather than just one. Swaps occur whe
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What Are Swaps?
Learn how these derivatives work and how companies can benefit from them.
OTC derivatives statistics at end-June 2022
The notional value of outstanding over-the-counter (OTC) derivatives rose to $632 trillion at end-June 2022, up from $598 trillion at end-2021. This marks a continuation of the moderate upward trend evident since end-2016. The gross market value of outstanding OTC derivatives, summing positive...
Do you think some of the brightest financial minds haven’t learned anything? How to hedge that kind of risk even better? Per se.
Over-The-Counter Derivatives - FEDERAL RESERVE BANK of NEW YORK
www.newyorkfed.org
And sooooo much more.
Honestly.
That said, as I’ve said. If one of our sched A banks wobbles because of all that stuff.. Find a deep dark cave
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They're right, that's why you just don't buy an index fund based on the SPX; XEQT is diversified globally, with exposure to Canadian and international markets.
Now start from before the COVID dip (the previous top), and you're up siginficantly. Without cherry-picking time frames, you're up over any 3-5 year period in the equity markets on average, as mentioned by Professor Goetzmann (you really should listen to that podcast). On top of that, markets tend to rebound hard after a signficant decline [1], which is what we just had in 2022 (e.g., SPX had over a 25% drawdown). Thus, it can be expected to earn signficantly higher than the long-run historical average return in the near term [1,2].
Plus, at what point do you jump in? Looks like you're trying to time the market--a losing strategy even if you miracuously go all in and catch the bottom (better off hoping to win the lottery). People who missed the rally are now praying for another bear market; as I've said, market's best days occur in a short period of time--you miss them, your long-term suffers badly. Need to be always in the market to get its returns (time in the market, not timing), and, albeit that means enduring the bad times, there are way more booms than busts and markets go up over time.
At the end of the day, your money, but I believe you said you retired early, you have a long life ahead of you, and I'm guessing you're probably under-weight equities. Actually, the latest podcast talks about exactly that--Yale Professor James Choi discusses investor behaviour [3] :
-why they tend to be underexposed to equities depsite being a great deal relative to risk;
-why people wrongly under diversify;
-why people believe in active management despite it being suboptimal;
Think for your situation, you should start from the 33:43 mark to 1:00:08).
[1]https://www.dimensional.com/us-en/i...hat-stock-gains-can-add-up-after-big-declines
[2]https://www.macrotrends.net/2526/sp-500-historical-annual-returns
[3]
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I just looked at the DXY; bear flag and looks like it might break below 101.
From a technical analysis perspective, a sustained break below 101 is essentially confluence that the bear market is over (the other signal was the SPX breaking above 4,200).
From a technical analysis perspective, a sustained break below 101 is essentially confluence that the bear market is over (the other signal was the SPX breaking above 4,200).
