Comments on: This and That http://www.canadiancapitalist.com/this-and-that-74/ Helping you invest and prosper Sat, 11 Feb 2012 12:40:17 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Canadian Capitalist http://www.canadiancapitalist.com/this-and-that-74/#comment-104496 Canadian Capitalist Mon, 21 Jan 2008 17:21:37 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-104496 FJ: While I think the banks are a good buy at this point in time as well (they are 5% cheaper today) and I am not inclined to buy bonds at this price, I believe bonds are a vital component of a portfolio. As the stock markets are in turmoil, there has been a flight to quality, which is why bond yields are depressed now. Last summer, bonds were yielding 4.5%. Just like stocks, the time to buy bonds is when they are relatively cheaper. FJ: While I think the banks are a good buy at this point in time as well (they are 5% cheaper today) and I am not inclined to buy bonds at this price, I believe bonds are a vital component of a portfolio. As the stock markets are in turmoil, there has been a flight to quality, which is why bond yields are depressed now. Last summer, bonds were yielding 4.5%. Just like stocks, the time to buy bonds is when they are relatively cheaper.

]]> By: Financial Jungle http://www.canadiancapitalist.com/this-and-that-74/#comment-104361 Financial Jungle Mon, 21 Jan 2008 07:20:17 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-104361 Phil - A couple of points: (1) capital preservation is never guaranteed regardless of the stock or the market we're in. (2) market is forward looking, and will likely bottom out ahead of the economic trough. Take Royal Bank for example. During the bull run of 1998 and 1999, RY shares suffered a ~8% decline. But over the next 2 years when US slid into a borderline recession (3 negative GDP growths although not consecutive), shareholders were subsequently rewarded with a 70% appreciation. Guessing where the stock is heading is a mug's game. I'd rather spend my time worrying about events that I can control, e.g. buying when things are cheap, and now I think banks are cheap. I would go as far as saying all banks will likly hike their dividend this year to maintain their streak, which will then widen the spread with 10-year bond even further. If you're ever going to own a bank in your lifetime, this is as good of a time as any to initiate a position and DCA in. Not that I'm an expert in bonds, but I'd never lend my money to anyone @ 3.8% for 10 years even if the capital is preserved. After-tax and after inflation, the real return dwindles to zero. If my investment horizon is 10 years, I rather take my chances with our banks. Phil –

A couple of points: (1) capital preservation is never guaranteed regardless of the stock or the market we’re in. (2) market is forward looking, and will likely bottom out ahead of the economic trough.

Take Royal Bank for example. During the bull run of 1998 and 1999, RY shares suffered a ~8% decline. But over the next 2 years when US slid into a borderline recession (3 negative GDP growths although not consecutive), shareholders were subsequently rewarded with a 70% appreciation.

Guessing where the stock is heading is a mug’s game. I’d rather spend my time worrying about events that I can control, e.g. buying when things are cheap, and now I think banks are cheap.

I would go as far as saying all banks will likly hike their dividend this year to maintain their streak, which will then widen the spread with 10-year bond even further. If you’re ever going to own a bank in your lifetime, this is as good of a time as any to initiate a position and DCA in.

Not that I’m an expert in bonds, but I’d never lend my money to anyone @ 3.8% for 10 years even if the capital is preserved. After-tax and after inflation, the real return dwindles to zero. If my investment horizon is 10 years, I rather take my chances with our banks.

]]> By: Phil S http://www.canadiancapitalist.com/this-and-that-74/#comment-103701 Phil S Sat, 19 Jan 2008 15:42:21 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103701 To FJ. While that is true, the other argument is that the principal investment in bank stocks may still go down, whereas the note on a Gov't of Canada Bond will give you back 100% of your original principal. I agree that it looks like a great time to pick up Big 5 bank shares, but there's still downside risk depending upon what other news may come out. There's an impending US recession, plus the credit crunch still exists and of course the exposure to US subprime mortgages and Commercial Paper is not fully known. Take a look at some of Al Rosen's commentaries on his opinion on what the Big 5 Banks have been doing. To FJ. While that is true, the other argument is that the principal investment in bank stocks may still go down, whereas the note on a Gov’t of Canada Bond will give you back 100% of your original principal.
I agree that it looks like a great time to pick up Big 5 bank shares, but there’s still downside risk depending upon what other news may come out. There’s an impending US recession, plus the credit crunch still exists and of course the exposure to US subprime mortgages and Commercial Paper is not fully known. Take a look at some of Al Rosen’s commentaries on his opinion on what the Big 5 Banks have been doing.

]]> By: FinancialJungle.com http://www.canadiancapitalist.com/this-and-that-74/#comment-103592 FinancialJungle.com Sat, 19 Jan 2008 02:52:01 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103592 Many analysts are rightfully pointing out that banks' growth will slow, but relative to alternative investments, banks are extremely attractive. The average dividend yield among the top 5 are in the mid 4%. Contrast that to 10-year Canada bond which offers only 3.8% and even less after tax. I understand this point is nothing new, but it's worth repeating. Many analysts are rightfully pointing out that banks’ growth will slow, but relative to alternative investments, banks are extremely attractive. The average dividend yield among the top 5 are in the mid 4%. Contrast that to 10-year Canada bond which offers only 3.8% and even less after tax.

I understand this point is nothing new, but it’s worth repeating.

]]> By: Canadian Capitalist http://www.canadiancapitalist.com/this-and-that-74/#comment-103416 Canadian Capitalist Fri, 18 Jan 2008 12:59:47 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103416 SP: Like Mike mentioned, you are doing the right thing by paying off credit card debt. Tim: QuickTax usually has a $10 mail-in rebate, so I don't think anymore paper will be wasted than before. Some marketing type must have decided to convert it into a "green" program. SP: Like Mike mentioned, you are doing the right thing by paying off credit card debt.

Tim: QuickTax usually has a $10 mail-in rebate, so I don’t think anymore paper will be wasted than before. Some marketing type must have decided to convert it into a “green” program.

]]> By: Tim http://www.canadiancapitalist.com/this-and-that-74/#comment-103389 Tim Fri, 18 Jan 2008 12:19:24 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103389 In order to save paper, Intuit has decided to require you to fill out a rebate form and then mail you a paper cheque, in a paper envelope. Those who will use netfile irregardless will not use any less paper because they wouldn't have used any in the first place. Furthermore, I doubt a savings of $10 will convince many people to use netfile if they are adamant about paper filing. I would in fact argue that Intuit is generating more paper than they are saving. In order to save paper, Intuit has decided to require you to fill out a rebate form and then mail you a paper cheque, in a paper envelope.

Those who will use netfile irregardless will not use any less paper because they wouldn’t have used any in the first place. Furthermore, I doubt a savings of $10 will convince many people to use netfile if they are adamant about paper filing.

I would in fact argue that Intuit is generating more paper than they are saving.

]]> By: FourPillars http://www.canadiancapitalist.com/this-and-that-74/#comment-103273 FourPillars Fri, 18 Jan 2008 02:48:14 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103273 Silicon - I don't care what the markets do - you can't go wrong paying off CC debt. Besides - the odds are pretty good that the "current buys" will be around for a while. Silicon – I don’t care what the markets do – you can’t go wrong paying off CC debt.

Besides – the odds are pretty good that the “current buys” will be around for a while.

]]> By: Silicon Prairie http://www.canadiancapitalist.com/this-and-that-74/#comment-103259 Silicon Prairie Fri, 18 Jan 2008 01:58:02 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103259 Watching the markets lately has really made me wish I wasn't paying off the last of my credit cards while saving for taxes and a down payment! I read an article on the Bloomberg site today that made it sound like the US economy was collapsing when the only fact they have is that the growth of the last few years can't continue forever... always love those over-reactions :) Watching the markets lately has really made me wish I wasn’t paying off the last of my credit cards while saving for taxes and a down payment! I read an article on the Bloomberg site today that made it sound like the US economy was collapsing when the only fact they have is that the growth of the last few years can’t continue forever… always love those over-reactions :)

]]> By: FourPillars http://www.canadiancapitalist.com/this-and-that-74/#comment-103240 FourPillars Fri, 18 Jan 2008 00:52:14 +0000 http://www.canadiancapitalist.com/2008/01/17/this-and-that-74#comment-103240 Thanks a lot for the link! Have a good weekend. Mike Thanks a lot for the link!

Have a good weekend.

Mike

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