This and That # 115: Easing Credit Crunch Edition

16 responses so far ↓

• 1 This and That # 115: Easing Credit Crunch Edition // Oct 23, 2008 at 10:50 pm

  [...] Original Canadian Capitalist [...]

• 2 Deb // Oct 24, 2008 at 7:47 am

  Deceptively simple advice. We can only control our actions and rely on our good decision-making. t
  Thanks for keeping us on the right track.

• 3 Million Dollar Journey // Oct 24, 2008 at 8:10 am

  Thanks for the mention CC - enjoy the weekend.

• 4 Laura // Oct 24, 2008 at 10:35 am

  Thanks so much for packaging all this great info. I try to follow William Bernstein’s writing and you make it so much easier. Also loved the previous humour stuff, it was great. Have a good weekend.

• 5 Nabloid.com // Oct 24, 2008 at 11:34 pm

  @ The Wealthy Boomer about Gold s role as a refuge in bad economic times:

  Comex has been keeping the value down at all costs to avoid appearing weak and causing a collapse in the US$.

  Most gold/silver dealers can’t get their hands on the stuff and it is going for WELL OVER spot price. The paper market is completely fudged. If everyone that owned paper gold/silver asked to actually receive the goods… the entire scheme would fall down like a house of cards, since they don’t have the gold/silver to back up all that paper.

• 6 rob // Oct 25, 2008 at 12:52 am

  I think that things will get worse, not better. My personal preference is to hold cash, reduce debt and keep my options open. But for now to do nothing.

  The US government recent actions have really screwed up things and will produce a massive increase in inflation down the line. Canada is about the only G7 country to have some fiscal room.

  Things were bad, now they are going to get really bad over the next year or so.

• 7 Phil S // Oct 25, 2008 at 10:07 am

  I think my days of frequent leisure travel to the USA may now be officially over, with the loonie diving below 80 cents and seemingly not having found bottom yet.

  Speaking of not having found bottom yet, I think December might be the best time to shop around for stocks, with the expected last-minute tax loss selling. And there will be a LOT of investors with tax losses to realize. It’s just a matter of shopping around to see if you’re willing to pick up another investor’s junk, even at a major discount.

• 8 Gavin D // Oct 25, 2008 at 9:29 pm

  Hi,
  I’ve been reading this website a bit, in the hope of being able to begin investing, which I’ve never done all my life.

  I was wondering what the people here think about investing in the current market, and if there is a less risky investment product, mainly for my daughters RESP and my wife and my own retirement goals.

  I understand this may be the wrong place to post such a question, so do pardon me!

  Thanks

• 9 Traciatim // Oct 26, 2008 at 11:40 am

  Hey Gavin D, I have both a daughter and a son. With my daughter I signed up for CST, a group RESP provider, which was a big mistake. For my son I use a mix of TD E-Funds series that are cheap and I feel is a good mix for me. I believe if you search around on this site you will find a post regarding the E-Funds and the mix that CC uses, and possibly in the comments what I use as well.

  You can use a huge variety of investments inside an RESP, so it may take some thought, but please just don’t get in to a group RESP plan. You may as well just use a GIC ladder with really low fees at a credit union if you want absolute safety.

• 10 Adeptus // Oct 26, 2008 at 7:58 pm

  Gavin D,

  Despite what all the media and even this website says about this is the investment oportunity of the century, don’t be fooled, the bottom of the stock markets is far from over.

  Investing now in the stock markets will be like “catching falling knives”. You will get hurt, as they haven’t hit the floor yet.

  If you look at the news from a macro level, things are NOT getting better:

  - (US) Government intervention has gotten more and more severe, pumping more and more hundreds of billions, with less and less impact over the past 2 months.
  - In fact, the US government has realized it can’t solve the problem(s) on their own and decided to meet with the G8 countries to execute colaborate efforts.
  - With that failure a few weeks ago, they are not proposing to meet with the G20; however that is bound to fail too, since each country is so vastly different in how they operate and their situation (not to mention distrust in US foreign & economic policies) that they are not going to be able to solve the problems.
  - Further, any government action has thus far been too little too late, and when trying to get many governments to act in unison - if at all possible - will be even slower. In the mean time stock markets burn.
  - There are now entire countries at risk of defaulting on their entire national debts: Iceland, Ukraine, Pakistan, Argentina, Russia, to name but a few. The “IMF” (international lender of last resort) will step in and provide loans with ridiculous borrowing costs, temporarily propping these countries upward, but then assuring their ultimate financial collapse.
  - The surge in the US dollar is a huge sign of WEAKNESS, not strength in the US economy. This would take an essay itself to explain. I expect a huge reversal of the US dollar in the next few months.
  - Corporate Bonds are likely to crash next.
  - Foreign nations may stop buying US T-bills from which the US treasury gets $ to execute bail-outs. Once that stops, Treasury/Fed will be printing $ against thin air, and US dollar may collapse, though that may not happen for 6 months to 2 years yet.
  - Oil going down, down, and down further - lately @ $63 a barrel; when we’re supposed to be in a peak oil scenario (oil in the world is running out), means that the world economy has realized we are in a global recession, with some countries (named above) approaching financial collapse.

  The problems we’re seeing today are the result of decades of erroneous actions by US gov and countries abroad in terms of fiscal policies. This is not a problem that can be resolved over night. Expect a decade of problems - at least.

  I strongly suggest you watch “The Crash Course”, which is a series of short videos on the key problems of our global economy explained in laymen’s terms.

  http://www.chrismartenson.com/crash-course

  Don’t believe the talking heads on CNN & CNBC & especially fox news & MSM. Many of those economists were wrong, and continue to be wrong. The sub-prime problems, has not and is not contained, the fundamentals of our economies are anything but strong, and the bottom of the stock market is nowhere near the levels we are seeing today.

  If you want to follow economists that have been right, time and time again may I suggest you google the following:
  Roubini, Mish, itulip.com

  Regards,
  Adeptus.

• 11 Canadian Capitalist // Oct 26, 2008 at 9:08 pm

  Gavin: Before you start to invest, I’d recommend getting a solid grounding about the markets.

  http://www.canadiancapitalist.com/recommended-reading

  Adeptus: I’m definitely in the stocks are a huge bargain camp but I have no idea what the next few years will bring. I’ve said many times that I’m investing for 2030, not 2010. The idea is to invest the portfolio according to an asset allocation policy at all times.

  But to the investors who point to the myriad problems facing the economy and markets, my question would be: why do you think all the bad news isn’t already baked into the price? Why is your estimate of valuation levels is better than the market’s? For every bearish “guru”, I can name investors with great track records who are bullish now.

• 12 MoneyGrubbingLawyer // Oct 27, 2008 at 8:58 am

  CC, thanks for including my article!

• 13 Phil S // Oct 28, 2008 at 12:47 am

  Gavin D,

  The thing about investing is that everybody’s got an opinion and it will inevitably be different from everybody else.

  With that being said, MY opinion is that you need to first take a step back and look at the macro-economic condition of where you’re investing. In my humble opinion, there is still bad economic news pouring out - things like consumer confidence (a measure of consumer spending which is hte driver of the economy) still pointing negative, massive job losses in the manufacturing sector turning the Canadian economy into a one-trick pony (commodities only), plus a downturn in the commodity market (driving down the price of our exports) and of course the credit crunch, the ABCP fiasco still not having been resolved, hedge funds unwinding their carry trades, the “toxic debt” which is in US mortgages to sub-prime borrowers, etc. The list of bad news is endless and there’s not much good news in sight. Based upon the overall economic conditions, my opinion is that stocks are NOT a good place to put your money, unless you are comfortable with potentially losing 20-50% of your investment. It is better to invest in secure (meaning CDIC insured investment vehicles like high interest savings accounts and GICs) until the macro-economic news starts to get better.

  When the economic news starts to look not so bad, THEN you can start to consider which businesses are likely to perform well in whatever environment. From there, you can pick individual stocks of companies which are trading at a discount in relation to their earnings, their book value, their dividend yield, their management team’s past performance… You name it, pick your poison and you can measure those stocks against that…

  Just keep in mind the old adage… A rising tide lifts all boats. Well, in my opinion, the converse is also true, where a falling tide can also run all boats aground as well.

• 14 macro environment in relation to marketing | Bookmarks URL // Oct 29, 2008 at 1:38 am

  [...] Comment on This and That # 115: Easing Credit Crunch Edition by Phil S With that being said, MY opinion is that you need to first take a step back and look at the macro-economic condition of where you’re investing. In my humble opinion, there is still bad economic news pouring out - things like consumer … [...]

• 15 Gavin D // Nov 13, 2008 at 2:11 pm

  Thank you Traciatim , Adeptus , Phil S and CC!

  I appreciate all the advice. I am not confident investing in the stock market yet, so i probably will hold until later.

  I would like to buy a home next year and so need to save in a Financial product that will help my investment grow in the short term. RRSPs is definitely the first option since I can avail of the First Time home buyers clause.

  In your opinion, would investing in mutual funds, like the e-series fund mentioned above be a good short term investment? I would think not, solely based on the current performance of the fund.

  I will be going to TD today to open an RESP for my daughter, btw, so thanks guys and to you CC for this great site!

• 16 Canadian Capitalist // Nov 13, 2008 at 2:18 pm

  Gavin: Money needed for short-term needs should be in less-risky investments like short-term GICs, money market funds etc., not in the stock market or long-term bonds. Like you mention, saving inside a RRSP to take advantage of home-buyers plan is an excellent option.

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