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moneysense.ca, 9/09/08
Ouch! TSX down 12% in 6 days
Another day. Another tumble. The TSX Composite closed at 13,771 on August 31st and in the next 6 trading days has fallen 3.4%, 1.2%, 2.5%, 0%, 1.4% and another 3.9% today, for a total of 12%. Hard to believe but the index closed about 15,000 as recently as June and is now flirting with bear market territory.
The rout is global in nature: US, EAFE and emerging markets are all at or near 52-week lows. The right thing to do in the face of market turmoil is to hang tough and maybe look for bargains. Personally, I’m fully invested with all the asset classes at or near my target allocation. Do you have a shopping list ready? If so, which stocks or ETFs are you watching?
moneysense.ca, 9/09/08
I just happened to buy some VEA and XRE because those were what I happened to be undeweight in at the beginning of this month. It’s nice when you keep your asset allocations the same and buy whatever you are underweight in every time you have enough funds in your RRSP to buy an ETF economically. It always feels like it’s a bargain.
Didn’t someone say at like 15,000 that it was going to 15,500 and above? I remember at the time (early July?) that I read the article, and my exact thoughts were: ding ding ding ding ding!
Doesn’t bother me – I’m holding XSB. Fortunately my timer had me out of the market.
Fred
Some market analysts still predict 15,000 at the end of the year.
If you read “A Random Walk Down Wall Street”, you will find Burton Malkiel’s opinion of market analysts. It’s not good.
XIU and XRE are on my shopping list. XIU has “discounted” nicely over the last couple of days, and I think there’s still room to drop another buck or so. XRE has held steady for the last month or so – I’m expecting it to slide soon before I jump in.
bought XRE and ECA …….. chipping at OIL and watching FIE.
I see Jeff Rubin has cut back his forecasts. As they say, if one has to forecast, forecast often!
http://www.globeinvestor.com/servlet/story/RTGAM.20080910.wcibc0910/GIStory/
I’ve been LOVING this CC!!
My portfolio’s gain/loss has pretty much remained contant (break even), but I’ve been adding lots of high quality, dividend paying, valuable companies with strong fundamentals for what I perceive to be the next 20-30 years.
Have you been buying anything interesting?
Ouch!^2
I topped up my RRSP considerably at the end of August, thinking “Buy low……”, and now I am trying to make a decision whether to jump into the market with a lump sum, or step gingerly by dollar cost averaging, using the cash I was previously paying to my mortgage.
DAvid
I love it!
I’ve added to my positions in BMO (a couple months back) and started one in GE (last week). I’m also looking at Reitman’s, Telus, Rogers and a few others. I want some energy exposure but I hope oil plummets some more so I can get in at decent prices.
Go bear go!
I’m fully invested with little cash and haven’t been too badly though I wish I had waited a bit more on VWO. VEA is a bit below target and as soon I have some savings to invest, that’s where it is going. The TSX rout had very little impact because I have very little exposure to commodity stocks (mostly through the mutual fund in a group RRSP and index funds in the smaller portfolios). The financials having fallen a lot already are not taking part in the fall, so it’s possible that they’ve turned the corner (or not).
Another stock blog: Yes, I saw that column too. It must be like the 4th time this year that Jeff Rubin has revised his forecast. I don’t know why intelligent economists even bother a forecast when they are going to look foolish most of the time.
Jeff Rubin sure has been getting a lot of press this year with his continually changing forecasts. To me, it doesn’t seem like any forecaster/economist has a clue. Half will be wrong, half will be right. Seems no different than money managers, really. Is there an “index” for forecasters, similar to index funds?! I’d buy that.
I’m on the fence, I’ve gotten most of the good deals I was looking for. On ETFs I’m still game for more XSP
On stocks I topped up my BMO and MFC holdings in the last 3 months, and might jump into a small position of either KMP, or the still-tanking POT.
Ben: As Jeff Rubin got the $100 oil call correct, his targets are widely reported in the media. But if his $200 call is wrong (he’s revised it down already), the media will find new “gurus” whose forecasts are worth reporting.
Actually, it’s interesting you mention an index of forecasts. Ken Fisher, a Forbes columnist, does something similar. He constructs a bell curve of forecasts and figures most will be wrong and the one of the outlier forecasts will be right. I don’t think that’s 100% reliable either.
First time writing here; good karma to CC for this blog and lots of good information.
I have been in and out of stock market for the last 8 years and, to be honest, had very poor results. So for the last 6 months I have been educating myself on the topics of “passive” investing, asset allocation, index ETF’s.
Correct me if I am wrong, but, in theory, “passive” investing makes market timing obsolete, so entry point is kind of irrelevant. But then CC writes “I wish I had waited a bit more on VWO.” Question to CC and other posters here: do you try to time entry points with index ETF’s to gain slight advantage over the market?
TSX has covered nicely today. One ETF that is promising in this turmoil is SLX (steel ETF) which touched its 52-weeks yesterday. Other ETFs to keep an eye are USO, VDE and XLF.
Many stocks in material and metals sectors are nearing 52-weeks low with great fundaments e.g., MT (Barron say solid as steel), POT another great potential.
Disclosure: I own MT and other steels stocks individuaaly in my portfolio.
Oil Oil Oil
Russian Capitalist: I waited for what I thought was an attractive entry point in VWO. Yes, I try to time entry by buying on major declines but once I’m in, it’s for the long haul. I’m not sure if there is any great advantage in doing so. At the very least, I want to avoid becoming greedy when most investors are greedy and avoid being fearful when most investors are fearful.
As a believer in macro as well as micro economics, I personally don’t think we’ve hit the bottom yet… Only today, Ford Oakville just announced another layoff of 500 more people as they got rid of the 3rd shift in their Paint Shop. Yesterday Toyota said they’re scaling back production plans at their new Woodstock plant. Wait until this all starts to hit the Tier 1 & Tier 2 suppliers – every direct automotive job lost is another 12 lost in suppliers and supporting businesses. The Canadian economy is still shedding jobs and this still hasn’t been reflected yet in consumer confidence, consumption, employment figures and the overall economy. Personally, I’m waiting until we see how bad the recession gets… Although I don’t think we’re in for a “dirty-30’s” type of major depression, I do think this recession is going to be much deeper and longer lasting than everybody else seems to think it is…
So, in terms of investing… I’m still stockpiling cash in savings accounts and other short term fixed income securities (GICs, T-Bills, Money Market mutual funds). In fact, I think I’m now sitting on almost 40% cash & short term fixed income. I think the Canadian stock market will get slammed some more before it starts to stabilize…
My thesis? What do you think is going to happen if you and your spouse both get laid off work and can’t find any new jobs? You’re going to draw EI and also off your savings, which would typically support you until EI runs out (1 yr)… What happens after that runs out? Then you start to sell off your stocks, bonds and other relatively liquid investments. What happens after that money runs out? Well, you sell off your house and rent an apartment?
In my humble opinion, we’re still in the part where most of the people who have been laid off work are still living off of EI. Next year, if things don’t get any better and their money has run out, then you will really start to see massive selling. Also, keep in mind that demographics is working against us as the leading edge of the Boomer generation is heading into retirement as well and need to sell off their securities and move to cash and fixed income products. In a traditional supply / demand economic scenario, that is the perfect explanation of why interest rates are really low. There are a lot of Boomers out there buying up T-Bills and GICs, driving up the face prices.
That being said, there are some stocks which are not economically sensitive. Such as biotech research stocks, or junior mining and oil & gas. It can be a great opportunity to pick some of them up when they’ve had the snot beaten out of them if they hit something big. Instant millions, baby! One of my friends’ kid brother retired at the ripe old age of 28 because he hit it big on a junior mining stock.
Phil S,
The flip side of the Baby Boom retirement, is the huge wealth they have accumulated, their expectations of service, and their willingness to pay for what they want. The retiring boomers do not have the thrift mentality of the previous generation who weathered the depression or the rationing during the wars. Early Boomers stepped on the bottom step of the golden escalator, and while accumulating great wealth, have also created a huge service sector. As capital comes available, and the numbers of individuals available to provide services to those Boomers declines, the value of these currently low-paying jobs will increase, as will opportunity and remuneration.
If you look around many parts of Canada just now, there is a lack of labour available — there are ‘Help Wanted’ signs everywhere. Currently, these are unskilled jobs, but soon, the lack of professional staff we see in the Health Care sector will extend to other areas. Will this help the Auto Worker? I’m not sure, it may depend on the ability they have to adapt their skill set to a different career.
However, one thing is certain — the change we forecast is inevitable.
DAvid
The TSX is not correlated with my portfolio whatsoever. I’d love to say that this is bringing out the bargains, but it simply is not the case of a dividend growth investor. Previous months have held better opportunities in the U.S. and Canada.
I’m such an unsophisticated rookie, but I took the chance that this would be a good time to buy a bit more … so I threw a hundred bucks here, two-hundred bucks there into my RRSP each day the TSX took a drop down .. it’s going into RBC Balanced Growth mutual funds, so I’m probably not taking full advantage of the bargains, but — and maybe I’m being naive — it feels like buying more when the price is low is a smart move for me.
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