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moneysense.ca, 22/01/08
Bank of Canada Rate Cut
The Bank of Canada cut interest rates for the second time in two months by 0.25% and strongly signalled that it may cut rates further noting that “further monetary stimulus is likely to be required in the near term”. Despite speculation in the press that the banks may not match a rate cut, the major banks promptly lowered their prime rate by 25 basis points to 5.75%.
The big surprise, of course, was the U.S. Federal Reserve cutting interest rates by a stunning 0.75%. Stocks responded by recovering from yesterday’s losses – the TSX Composite shot up more than 500 points and the losses on Wall Street were not as bad as was feared.
If you panicked during yesterday’s sell-off, you should take a hard look at your asset allocation and see if you are taking on more risk than you can stomach. There is nothing worse than selling in a panic and locking in your losses.
moneysense.ca, 22/01/08
Great post CC! I’m happy to see that the big banks lowered their prime to match.
CC, that is very true. I actually completely went against my inner conservative investor, and bought MORE banks on Monday and I am glad I took the chance. The risk wasn’t high but I knew I was buying something of value.
I did a “controlled” sell and sold most of my Emerging Market, Energy, and riskier ETF’s last week. I kept my “core” ETF’s including Canadian Financial, World Index, and my non-indexers including TD Monthly Income and – of course – my Berkshire Hathaway stock (which I intend to add to over the next few months considering how Buffet’s stock seems to make amazing gains after a lull or drop in the general market).
I am also intruigued that the Fidelity Magellan Fund is now accepting new customers. Though I normally don’t invest in Mutual Funds (with the exception of the TD Monthly Income), the Magellan fund I think deserves a serious look in this time of turbulance.
TD Waterhouse does not seem to offer it (yet?). Any guesses on if and when they might CC??
Looks like markets are falling again today. I’m hoping for a fire sale in VWO
Dave: I don’t follow mutual funds, so I have no idea when TDW will offer the Magellan fund. If you give them a call, maybe they can tell you when they’ll offer the fund.
The Megellan fund is US based so Canadians can’t buy it.
I wouldn’t sweat it – buying that fund is like buying season tickets for the Leafs or Habs because they used to be great.
Mike
FP. Nice sporting analogy! I like it!
CC. I didn’t realize how deeply invested I am in interest-sensitive stocks until now. My portfolio is skyrocketing despite the broader market tumbling. The reduction in lending rates appear to be raising earnings expectations from the REITs and mortgage lenders (which make up most of my portfolio). I just topped up my position in another American REIT with whatever leftover cash I had accumulated from distributions, but unfortunately, I’m pretty much 100% invested in my US portfolio.
Energy stocks are getting hammered. I didn’t think I’d ever see Suncor below $83, Talisman below $16 and CNQ below $60. Market sentiment sure is fickle. Wasn’t it only a week or two ago when everyone was cheering the $100 oil?
Phil: The only non-Canadian stock I hold is AIG. Everything else is indexed. I’ve been watching VWO and I’ll be interested in it at lower prices.
FJ: I don’t own any energy names directly. I’ve owned CNQ at one point (bought at a split-adjusted $14 – and this one stock made up for all my misadventures with tech stocks) and I still hold the opinion that there are too many anglers fishing in that pond. Speaking of which, I hope TRP drops to the $34 range.
[...] postings about the rate cuts around the blogosphere were made by Consumerism Commentary, Canadian Capitalist and Quest for Four [...]
Cut of interest rates is good news. But banks will hardly miss a chance to earn money. So, they raise fees and payments. Citibank has already raised ( http://www.applyfast.com/CitiBank-Credit-Cards.php )