The Coming Crash?

socialist · August 20, 2015

23 EM markets are in meltdown.
Commodity prices are collapsing.
EM currencies are falling.
EM central banks have lost control of their currencies.
A massive global deflation is occurring which is exposing massive debt.
The US dollar's rise is killing American exports and a rate hike by the Federal Reserve will only exacerbate the problem.

News on all this is rarely, if ever, reported by the mainstream media.

The world is experiencing a massive deflation resulting from the over-creation of fiat money without a corresponding increase in economic growth to support it.

Asset and commodity prices are over-inflated. The air is coming out of virtually all assets simultaneously. If this trend continues, the amount of debt left exposed will cause another financial crisis, the scale of which will dwarf what happened in 2008.

msj · August 20, 2015

Yes, it is a great time to by a buyer.

I have raised some cash with some sells in the past few weeks and I am now spending it along with my monthly contribution.

The only issue is that there is so much so cheap that I'm like a kid in a candy store when the store is going out of business.

Glad I don't need the investments for another 25 years.

bush_cheney2004 · August 20, 2015

Yes, it is a great time to by a buyer.

Agreed...we kept a lot of powder dry waiting for this very opportunity. What goes up...must come down.

As far as a "crash" goes, the pending correction is long overdue. The world is swimming in oil.

sharkman · August 20, 2015

Isn't it better to wait for the markets to find a bottom than to buy on the way down?

bush_cheney2004 · August 20, 2015

Isn't it better to wait for the markets to find a bottom than to buy on the way down?

Yes, but close to the bottom is often good enough. We still have a way to go. It is possible to profit from investments in either direction.

socialist · August 20, 2015

Yes, it is a great time to by a buyer.

I have raised some cash with some sells in the past few weeks and I am now spending it along with my monthly contribution.

The only issue is that there is so much so cheap that I'm like a kid in a candy store when the store is going out of business.

Glad I don't need the investments for another 25 years.

When the Great Depression began in 1929 people suffered terribly, but all the money was still there, but for a lot of really dumb reasons wasn't spread around....until WW2 when all of a sudden there was lots of capital to fight Germany, Italy and Japan.

Where did that capital come from?

If Canada has tied itself too closely to world markets, like it seems to have done, we will suffer. (not like the Great Depression, hopefully)

Canada needs to create an attitude of independence.

msj · August 20, 2015

This ain't going to be a great depression.

The markets will come back, and, in fact, if one looks into it, if you continued to buy the Dow Jones from 1929 through to 1954 (when it came back to its previous level) you will find that, with dividends, people would have earned a decent return.

My retirement plan only needs 5%. Anything more is gravy and anything less means an occasional supplement of dog food so I'm not worried.

As for timing the bottom - no one can do that.

I prefer to start buying when I see something attractively priced and then I just keep buying all the way down.

Better to be early than not invest at all is my motto.

It also helps to have a strong stomach - it does not bother me to see an investment go down by 40% or 50%. Sure, it may be a lesson about being too early but in the end my returns work out just fine most of the time.

bush_cheney2004 · August 20, 2015

If Canada has tied itself too closely to world markets, like it seems to have done, we will suffer. (not like the Great Depression, hopefully)

No, Canada's economy was nothing to write home about until it became more integrated with U.S./global economies. There would be even more, longer term suffering if Canada had not done so.

Bonam · August 20, 2015

US stock indices are only a few % off all time highs. I'd wait til it drops a bit lower before buying in. Usually I wait until the S&P 500 is 10% below its last all time high to start buying in. On average, you get one 10% dip every year or so.

Rue · August 20, 2015

I have to agree with Bush's opinion that some of course do not that the integration of Canada's economy with the US was beneficial.

I for one would have argued at one point becoming too dependent on the US market would be our downfall. I still don't think any nation should allow itself to be dependent on another but the fact is world markets are all inter connected now with so called free markets.

Canada can not survive and deal with China, the EEC, etc., without a strong common market with the US. I think what we are seeing is that Harper did not just sit on his but. He pushed and is pushing for greater exports through trade arrangements with Europe.South America, China, the Pacific and not so much worried over the US but Mexico which is the cheap labour market of North America now.

Canada has to face reality. It has people who expect very high standards without willing to work for them. We have shipped all manual labour jobs to third world countries. People born here feel entitled. Just listen to that idiot Justin Trudeau dribbling out of his diapers about flexible hours, on and on.

We are a nation whose people will not do certain work anymore. We expect cheap labour in Mexico, Cambodia, Bangladesh, China, Vietnam to do it, while all our citizens with their useless MBA's sit at computers and do what exactly? Not much. The computers do all the thinking-we just sit filling in information as secondary support to imposed programming of an elite few.

Our economy is not diversified. We are too dependent on oil and gas. We sold all our coal away to China. We literally signed it away to them.

So what do we do unique in Canada? Not much. Nothing we do is cutting edge. Compare a tiny country like Israel and the sheer volume of technological advancements it has made that impact on our daily lives compared to Canada.

We are a follower nation. We are content not to invent and innovate but to serve as a natural resource provider. That is our weakness.

We need to diversify so we are not dependent on oil and natural gas market prices controlled by others.

Our education system needs to re-haul itself. We are churning out unoriginal, followers with no imaginations, zero ability to engage in abstract and creative thinking and who have no attention spans.

That does not make shakers and movers in business. It makes desk sloths.

GostHacked · August 20, 2015

I have to agree with Bush's opinion that some of course do not that the integration of Canada's economy with the US was beneficial.

I for one would have argued at one point becoming too dependent on the US market would be our downfall. I still don't think any nation should allow itself to be dependent on another but the fact is world markets are all inter connected now with so called free markets.

You are correct, in a so called global economy, there can really be no independence. And even if the nation is in economic trouble, like Greece, it seems like the rest of the group will chip in to 'help'. Puzzling in my view.

And to your other points about diversification, several things can explain that. Manufacturing shifting overseas, technology replacing people, big corps eating smaller corps.

I foresee an increased talk in a global single currency. Let me correct, two competing new currencies. I also see China going into a financial meltdown in the next year. Their recent situation of troublesome markets have had some big impacts on the rest of this interconnected world economy. As the US's 2008 housing bubble had global impacts. 'The bigger they are the harder they fall.', is a common phrase.

msj · August 21, 2015

This is funny. We are too dependent on O&G or on commodities.

Just wait.

One day, perhaps because oil stays below $42 per barrel (and Western Canada Select stays below $25) for a long time, or for other reasons, our unemployment rate will go up to 10 or 11% just like those poor Americans.

Then we will discover just how much of our economy is in FIRE (finance, insurance, real estate).

And we will find out how much that will hurt.

That is when people will finally wake up to the fraudulent lending practices that are occurring.

The easy lending practices that the government has encouraged.

The various ways the government has kept it going and is trying to keep it going (Harper promising to allow people to rob even more of their retirement savings for a down payment, the proposed permanent home renovation tax credit).

Commodity cycles come and go and Canada has always dealt with them.

Financial/Housing bubbles are a whole other level.

msj · August 21, 2015

US stock indices are only a few % off all time highs. I'd wait til it drops a bit lower before buying in. Usually I wait until the S&P 500 is 10% below its last all time high to start buying in. On average, you get one 10% dip every year or so.

Sure, and how many times does it dip 10%?

Do you always hold back and only buy on such dips?

I invest money monthly and while I do not always buy an investment right away, I don't lose any sleep about whether the market is going to go down or is going down.

I deploy my cash as it is convenient and when something hits a price I am happy with.

Otherwise you can become like a deer in the headlights - waiting for something to go down, then it goes up and you end up not to buying at all.

Bonam · August 21, 2015

Sure, and how many times does it dip 10%?

Do you always hold back and only buy on such dips?

I invest money monthly and while I do not always buy an investment right away, I don't lose any sleep about whether the market is going to go down or is going down.

I deploy my cash as it is convenient and when something hits a price I am happy with.

Otherwise you can become like a deer in the headlights - waiting for something to go down, then it goes up and you end up not to buying at all.

I invest into equities monthly, but also keep a fixed % of my portfolio in cash, plus a savings account for unexpected expenses, etc. When the markets drop 10% off the all time high, I take some of that cash and buy more equity, which weighs my portfolio more heavily towards equities until I've rebuilt the cash reserve. If it drops 20% or more off the all time highs, I further increase the investment, potentially using margin.

When the S&P 500 was 50% off its all time high in 2009, I emptied out all my savings accounts and maxed out all my margin to buy as much as I could. Like Warren Buffet says, be greedy when everyone else is being fearful. Sadly I didn't have nearly as much capital to play with at the time, only 15k or so, having just finished university. It's tripled since then.

msj · August 21, 2015

Excellent way to do it.

My method tends to be - if I get an email from my investment account because one of my investments has breached a pre-set threshold then I go in and buy it.

The problem being that lately I have been getting lots of emails and despite ignoring them for personal/work reasons, I have been deploying the cash like there is no tomorrow (pardon the pun here).

But no matter, more cash is going in soon enough and with some dividend payments coming in the next couple of months my cash position will be in fine shape.

But if oil goes down into the 20's then, yeah, I will be using borrowed money.

marcus · August 21, 2015

Canada needs to create an attitude of independence.

Which means that we need to do more than just sucking on the nipple of oil. Unfortunately, Harper are the lips that only want to suck on oil.

sharkman · August 21, 2015

This ain't going to be a great depression.

The markets will come back, and, in fact, if one looks into it, if you continued to buy the Dow Jones from 1929 through to 1954 (when it came back to its previous level) you will find that, with dividends, people would have earned a decent return.

My retirement plan only needs 5%. Anything more is gravy and anything less means an occasional supplement of dog food so I'm not worried.

As for timing the bottom - no one can do that.

I prefer to start buying when I see something attractively priced and then I just keep buying all the way down.

Better to be early than not invest at all is my motto.

It also helps to have a strong stomach - it does not bother me to see an investment go down by 40% or 50%. Sure, it may be a lesson about being too early but in the end my returns work out just fine most of the time.

So because your plan only needs 5% then everyone should follow your strategies? Everyone is at a different comfort level and has different goals and needs. Buying on the way down and immediately losing 20-30% of one's principal just because some guy on the internet said it's okay seems sketchy.

You don't have to time the bottom, just at least wait until it seems like the market is finding a bottom.

Rue · August 21, 2015

Harper did not make Canada dependent on oil and gas, a complex series of world market changes did. Harper did not shut down manufacturing, multi-nationals moving to cheap source labour countries did. Marcus wants to blame Harper but its Marcus by choosing WalMart and suv's who did.

Harper has inherited world markets and consumer patterns he does not create and can only adapt to. I think as much as he has problems with the rot of political corruption that comes from too many years in power, he has far better management skills than Mulcair or Trudeau would with economic issues.

As for trying to suggest Harper has created some false lending scam etc. I do not know what MJ is getting at. As the world markets went in the toilet over real estate and lending practices, Canada did NOT precisely because of the banking regulations he implemented.

Our dependence on oil and gas was always there. It existed with non Conservative governments as well.

People feel Harper protects large corporations. Well he does. They employ people who keep the economy running. If Mulcair has his way he will tax those companies forcing many to move out of Canada and others to lay people off-when you tax a large company hiring hundreds or thousands of people, you in fact make it harder to find and keep a job and so its the middle and lower classes that suffer because the companies either go bankrupt or scale down firing many.

I do not buy Mulcair's b.s. which is based on offering feel good social spending. We the tax payer will be taxed for it. As for Trudeau he is unable to discuss economics. He is limited to talking head sound bites. Its scary how stupid he is.

Edited August 21, 2015 by Rue

socialist · August 21, 2015

Which means that we need to do more than just sucking on the nipple of oil. Unfortunately, Harper are the lips that only want to suck on oil.

A nice thing about being a conservative dividend investor is I don't have to fear market crashes. Instead I love the buying opportunities. While other people panic I have a wonderful time increasing my dividend income.

Argus · August 21, 2015

Isn't it better to wait for the markets to find a bottom than to buy on the way down?

There's no way to predict a bottom. But when it bounces back it tends to be with a +350 point day, after which you've lost a lot of your chances.

Bonam · August 21, 2015

A nice thing about being a conservative dividend investor is I don't have to fear market crashes. Instead I love the buying opportunities. While other people panic I have a wonderful time increasing my dividend income.

Yeah, with today being another down day, I'm starting to re-deploy some cash reserves to be ready to buy some more.

socialist · August 21, 2015

Yeah, with today being another down day, I'm starting to re-deploy some cash reserves to be ready to buy some more.

If this stock market adjustment continues it will trigger a flight to "safety" and people will crowd into bonds . This - unfortunately - is when the real mayhem will ensue. The underlying causes to the current financial chaos are bankrupt governments that continue to hobble economies with higher taxes and regulations that thwart commerce and growth all for the promise of delivering equality and other fantasies. Add to this unchecked government intrusion in all aspects of daily life and you get what we are seeing now.

Eventually governments - starting in Europe - will not be able to keep the debt Ponzi scheme going and this is when the real collapse will come. Once everyone is "safely" invested in bonds it will be the best time to buy US equities because this is the final safe haven left. US Equities not bonds.

Hudson Jones · August 21, 2015

If this stock market adjustment continues it will trigger a flight to "safety" and people will crowd into bonds . This - unfortunately - is when the real mayhem will ensue. The underlying causes to the current financial chaos are bankrupt governments that continue to hobble economies with higher taxes and regulations that thwart commerce and growth all for the promise of delivering equality and other fantasies. Add to this unchecked government intrusion in all aspects of daily life and you get what we are seeing now.

Eventually governments - starting in Europe - will not be able to keep the debt Ponzi scheme going and this is when the real collapse will come. Once everyone is "safely" invested in bonds it will be the best time to buy US equities because this is the final safe haven left. US Equities not bonds.

You'll get a much better return if you buy Iranian Rials. I was just looking at the exchange rate before and after sanctions and with all of the countries lining up and ready to invest into the country, their currency rate will for sure go up over 100%.

msj · August 21, 2015

So because your plan only needs 5% then everyone should follow your strategies?

Hmmm, I seem to recall clearly stating that "my retirement plan only needs 5%" which is not the same as your retirement plan.

Everyone is at a different comfort level and has different goals and needs.

One would hope people are intelligent enough to know this.

Buying on the way down and immediately losing 20-30% of one's principal just because some guy on the internet said it's okay seems sketchy.

I would hope people would not take financial advice from an anonymous person on the internet.

As for "losing" principal - it is not lost until one has sold.

Since my style is to be in the market long (25+ years) it makes sense for me to accumulate investments as they go down. That is, when they have reached a point where I think they are "cheap" I start to buy. As they keep going down I keep buying until I see another opportunity.

The funny thing is that the opportunity I am seeing right now is not in oil. It is somewhere else which is where a good chunk of my money is sitting.

But that will change one day but who knows when.

You don't have to time the bottom, just at least wait until it seems like the market is finding a bottom.

Yep, I agree and already stated that.

Bonam · August 21, 2015

The funny thing is that the opportunity I am seeing right now is not in oil. It is somewhere else which is where a good chunk of my money is sitting.

After today, there are a lot of companies down to pretty good value to buy in at across all sectors. I'm hoping we get a few more days like this next week!

Edited August 21, 2015 by Bonam