- The biggest news this week is the Bank of Canada’s surprising decision to stand pat on interest rates. Actually, surprising is a bit of an understatement. The markets were shocked and bond yields rallied sharply. Though consumers will pay the same interest on variable-rate mortgages and personal loans that are tied to the prime rate, the rising yields in the bond markets means that we’ll be paying higher rates on fixed-rate mortgages in the near future.
- The surprising thing about a hedge fund manager taking up Warren Buffett on his bet that a collection of hedge funds will not outperform the S&P 500 over the next 10 years is that only one has taken up on Mr. Buffett’s wager. It is touching to see the confidence that hedge fund managers have in their profession.
- Many thanks to Pete for the link to a New York Times article on how American society has polarized into the investor class (who save and invest) and the lottery class (who resort to payday lending, credit cards and lottery tickets). An article titled A Nation in Debt summarizing the report referenced in the column can be found here.
- Claymore Investments’ “top model summer ETF competition” might be the perfect place to indulge your gambling instincts. You can use your “investing” skills to design a winning portfolio constructed out of Claymore ETFs.
- The Dividend Guy discovers the joys of rebalancing.
- Preet on the economics of his annual pilgrimage to the Canadian Grand Prix in Montreal.
- Canadian Mortgage Trends conducted a two-part interview (Part 1 and Part 2) with Moshe Milevsky on fixed and variable rate mortgages.
- Canadian Investor on the investing surprises and ideas from how the Canada Pension Plan invests our (and our employer’s) contributions.
- Growth in Value shares his five basics for financial success.
- Million Dollar Journey finds out if hybrids are worth it.
[Update: I forgot to wish all the Dads out there a happy Father's Day! Have a great weekend everyone!]
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7 responses so far ↓
1 WhereDoesAllMyMoneyGo // Jun 12, 2008 at 11:17 pm
Thanks for the link - have a great weekend!
2 Phil S // Jun 13, 2008 at 12:10 am
It’s been quite a while since I investigated the Claymore funds, but I was scared off by the cash flow statements on the funds of their in which I was interested. The funds I looked into seemed to be overdistributing and it wasn’t completely clear and concise what was going on with the management fees - the math didn’t seem to work out right. You should take a close look at their prospectus and cash flow statements before you invest in their funds.
3 Million Dollar Journey // Jun 13, 2008 at 7:31 am
Thanks for the mention CC, enjoy the weekend!
4 Michael James // Jun 13, 2008 at 10:42 am
I liked the two articles about debt in America. However, I found Barbara Whitehead’s contention that the problem comes mainly from regulatory structures and business practices much more plausible than David Brooks’ idea that it is mainly a morality problem. It seems apparent to me that the debt industry has changed much more than personal weaknesses have changed.
5 Canadian Mortgage // Jun 14, 2008 at 5:28 pm
Thanks for the mention CC!
It’s interesting how much bond yields ramped up after the BoC’s announcement. 12 of 12 primary securities dealers got the call wrong. These are people with more money and information than they know what to do with.
It really is humbling, and it shows how little any of us can ever really know about the direction of interest rates (even short-term!).
Have a great weekend,
Rob
6 Phil S // Jun 14, 2008 at 11:42 pm
Actually, I rather thought to myself that interest rates should be going UP to stave off inflation, not down like the Bay Street prognosticators were calling for… So, standing pat is the next best thing.
Just one man’s opinion, but I think a 3% BoC rate is plenty of stimulus for the economy - someone who is willing to borrow money at 2.75% interest rate to invest should be able to make money at 3%, so in terms of economic stimulus, I don’t see much difference between 2.75% and 3%. In fact, I think a 4% rate is also stimulative for the economy - most businesses should be able to make a lot more on profit margin than a 4% interest rate would eat up. The big problem is obviously that now the big 5 banks are gun-shy. They won’t be lending out money to any Tom, Dick and Harry anymore - so no matter what the BoC does, the banks which are the conduit for that money may be stoppered. As a result, those precious few basis points would have more of an effect on inflation than on the economy.
That said, I think the US recession is going to eventually spill across the border to Canada anyways. Lowering interest rates may delay the recession, but I think a Canadian recession will be inevitable… I think we might as well defend the currency so that our purchasing power doesn’t get obliterated like I think the savings of US retirees will be by the inflation monster… In other words, we shouldn’t try to follow the US economy down the path that they have chosen… It looks very dark and creepy.
7 Canadian Capitalist // Jun 15, 2008 at 6:50 pm
Michael: I agree. Movies liked Maxed Out seem to bear out your contention that institutional changes are to blame for the sad state of thrift among the majority of the population.
CMT: The good news is that bonds might become interesting when the yield is between 4% and 5%.
Phil: It is amazing to see the move in the bond markets subsequent to the bank’s move. In a mere week, bond yields have gone up more than 50 basis points.
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