Archive for June, 2012

Will Germany say ja to Euro bonds?

Despite Germany’s staunch opposition to issuing bonds jointly with other European countries, this article argues that Germany will eventually cave and pay up because the costs of a Euro breakup will be disastrous for it.

Investors behaving badly

With all the volatility in the markets, it is hardly surprising that investors have responded by stampeding out of stock markets. According to the Investment Company Institute, which tracks mutual fund flows in the US, investors have been net sellers of equity mutual funds in 12 of the past 12 months.

Dividend Investors are worry warts too

If you hear dividend investors talk, you’d think that all there is to investing is to buy some dividend payers, sit back and collect the dividends and not worry what the markets are doing. It turns out many dividend investors worry about the market direction just like other investors. This Globe and Mail column quotes dividend investor Tom Connolly worrying that “stocks may be in a long-term bear market” and “the lows of the 2009 bear market could be retested”.

Adding Commodities to a Portfolio

This article points out that adding commodities to a portfolio can reduce volatility without impacting returns.

Escher in LEGO blocks

And now for something completely different… It is amazing to see M. C. Escher’s lithograph print Ascending and Descending rendered with LEGO blocks here.

A 2×4 to the Housing Market?

Finance Minister Jim Flaherty announced steps to cool the housing market by (1) reducing the maximum amortization to 25 years from 30 years (2) lowering the maximum refinancing amount to 80 percent and (3) reducing the ratios used to calculate mortgage affordability and (4) limiting mortgage insurance to homes priced under $1 million. You can read the news release and links to more information here.

Concurrently, the OSFI announced that the maximum Loan-To-Value of Home Equity Lines of Credit (HELOCs) will be lowered to 65 percent (from the current 80 percent). HELOCs will continue to remain revolving lines of credit and will not require amortization. If you currently have a HELOC and are close to the 80 percent limit, do not worry (though you may want to think about paying it down to a comfortable level): the HELOC rules will not apply retroactively.

The Biology of Risk Taking

Recent research is providing some interesting insights into the role that testosterone might be behind exuberant market conditions and the stress hormone cortisol behind market pessimism.

John Coates, the researcher behind these findings also shared his views in an interview with the CBC’s Anna Maria Tremonti.

Buy-and-hold dies again

Gordon Pape says that “to a degree, it’s true” that buying-and-holding index funds is a dead idea. So, what should investors do? Mr. Pape suggests looking at stock charts, companies with “industry leadership”, strong balance sheets, good dividend record and relative strength in bad markets. One wishes picking winning stocks were so easy.

The Importance of Rebalancing

It’s often painful but Rob Arnott explains why it is important to rebalance out of highfliers and into beaten up and unloved securities.

Interest Rates may not go up afterall

Conventional wisdom holds that interest rates have nowhere to go but up. Jason Zweig explains why conventional wisdom may be wrong and low, low interest rates may be here to stay for a long time.

The 1% writes back

A one-percenter makes the case that the very wealthy, even those who speculated with other people’s money and brought the world to the brink of disaster, deserve the riches because their innovations is bringing vastly more benefits to the other 99 percent.

And finally, on a non-related subject, NASA has made available some spectacular video and images of the transit of Venus across the sun on June 5, 2012.