The ongoing financial turmoil and financial discussion thread

[macker]

Originally Posted by twotoner

The recovery is a sham. The first few links I posted show the US government inflated the earnings of the banks in Q1 through tax payer funded AIG CDS settlements way above market value.

When it tanks again, attendance and profits at even the best teams will suffer. Same thing goes for your favourite *Market Leaders*
http://www.usatoday.com/sports/baseball/2009-04-29-mlb-attendance_N.htm

People talk about more liquidity being pumped into the system. It isn't enough, most major banks right now are INSOLVENT. Even the phony stress tests showed this. Banks receiving money are hanging on to it. Even more telling, there aren't enough qualified borrowers available to lend to.

Latest employment data in the US was yet again revised downward to 637,000 lost in April.

Here's some more current links:

Five reasons why the rally could fizzle (Marketwatch)
GM sends termination notices to 1,100 dealers (Bloomberg, AP)
Europe economy contracts the most since 1995, at 2.5% (Bloomberg)
The retrospective massaging of economic data by the Government (Financial Armageddon)
The upcoming 81% tax increase (Forbes)

Those headlines are nothing......I have kept a bunch from November - February that I go back over now and they are laughable. Great Depression 2 etc. etc. I guess what we could do is see where things are in 6 months (not 6 days) and then we will see how the recovery is going. I think the markets will be higher vs today but if I am wrong I am willing to wait as it would take a lot to wipe out the huge gains I have so far this year. Let's wait and see where we are on November 15th....There is a reason Warren Buffett watches CNBC with the sound turned down....The media is a sham and who is holding them accountable for the panic headlines of just a few months/weeks ago....Ironically Warren Buffett the same guy who ignores the noise is greedy when others are fearful....

The stock market demands conviction; it victimizes the unconvinced :
Peter Lynch

[MoneyGuy]

I haven't contributed to this thread for a long time but thought I'd poke my head in and alert you guys to the terrific opportunity right now in high-yield bonds. When HY spreads are over 1,000 bps the returns on these bonds tend to be extraordinary and over the last three times these spreads existing HY bonds have substantially ourperformed equities. Actually, high-yield bonds are almost equities anyway. If anyone wishes, I could provide an elaboration on this as I have lots of research on this topic.

[Agamemnon]

Originally Posted by MoneyGuy

I haven't contributed to this thread for a long time but thought I'd poke my head in and alert you guys to the terrific opportunity right now in high-yield bonds. When HY spreads are over 1,000 bps the returns on these bonds tend to be extraordinary and over the last three times these spreads existing HY bonds have substantially ourperformed equities. Actually, high-yield bonds are almost equities anyway. If anyone wishes, I could provide an elaboration on this as I have lots of research on this topic.

I'd like more info on this, whether by PM or in the thread. How do you buy them, what types/kinds are there, any specific recommendations?

[photon]

In-thread would be nice.

[macker]

Regarding US differing from Canada : US Banks were leveraged 40-1 and CDN banks were 1/2 of this amount so you can't even compare them.
http://seekingalpha.com/article/1378...oment-to-shine You have to give CDN banks credit . Also our broader economy is based on things that the world needs and are found in the ground/grown etc. and this will distance our economy from the US in the years ahead.


Corporate bonds : There is a huge appetite for corporate bonds right now and they are selling out just as quick as they are putting them out (see recent offerings from Lowlaws, Teck Resources etc.). Many people are realizing that they were light on bonds prior to the credit crisis and are adjusting their portfolios accordingly. I don't have any but I am aggressive here. I guess you could use your age to tell you what percentage of your portfolio you should have in bonds?

[Slava]

Originally Posted by MoneyGuy

I haven't contributed to this thread for a long time but thought I'd poke my head in and alert you guys to the terrific opportunity right now in high-yield bonds. When HY spreads are over 1,000 bps the returns on these bonds tend to be extraordinary and over the last three times these spreads existing HY bonds have substantially ourperformed equities. Actually, high-yield bonds are almost equities anyway. If anyone wishes, I could provide an elaboration on this as I have lots of research on this topic.

I just wish I had a dollar for every guy coming to my office to peddle junk bo errr...I mean high yield bonds. I am admittedly leery of these and definitely low in terms of both my portfolio as well as my clients. I can't help but think that there is going to be a point where you have to make some quick trades and get out right before all of the defaults?

Originally Posted by macker

Regarding US differing from Canada : US Banks were leveraged 40-1 and CDN banks were 1/2 of this amount so you can't even compare them.
http://seekingalpha.com/article/1378...oment-to-shine You have to give CDN banks credit . Also our broader economy is based on things that the world needs and are found in the ground/grown etc. and this will distance our economy from the US in the years ahead.


Corporate bonds : There is a huge appetite for corporate bonds right now and they are selling out just as quick as they are putting them out (see recent offerings from Lowlaws, Teck Resources etc.). Many people are realizing that they were light on bonds prior to the credit crisis and are adjusting their portfolios accordingly. I don't have any but I am aggressive here. I guess you could use your age to tell you what percentage of your portfolio you should have in bonds?

You're right on this point. Unfortunately this is where investor psychology is doing people in. The time to be into bonds was last year at this time (not specifically into high-yields, just good ol' fashioned debt instruments..US denominated if possible!). Now that people have been burned they are making the age-old mistake of getting more conservative at the bottom or thereabouts.

As I posted somewhere in one of these threads there are/were some amazing bonds out there with great guaranteed returns (9% plus). I'm far from a guy who would not invest in bonds. I just think that if you thought that RIM or Encana was a great deal at this time last year, which a lot of people obviously did, you have to be enamoured with them for 1/2 price!

[tvp2003]

June 1: One of the big three files for bankruptcy, oil is up to $68 US, the TSX is up to 7 month high, and the Canadian dollar is gaining ground on the US dollar fast.

Can any "experts" (not necessarily on CP) explain what the heck is happening, or are things just completely in chaos right now?!?

[Slava]

Originally Posted by tvp2003

June 1: One of the big three files for bankruptcy, oil is up to $68 US, the TSX is up to 7 month high, and the Canadian dollar is gaining ground on the US dollar fast.

Can any "experts" (not necessarily on CP) explain what the heck is happening, or are things just completely in chaos right now?!?

I don't know if there is a single explanation to be had, but basically things are slowly recovering while there is still some bad news out there. The GM filing doesn't rock the markets though because this was priced in months ago; its not new news to be factored in. With any recession (and yes, even the "Great Recession" as this may come to be known) job losses will continue for months and the bad news likely keeps coming for a few more months. The stock market though responds much sooner than the rest of the economy and leads the indicators out of these events.

I do wonder where Claeren and his 10 years of depression posts are these days though! (I know, you didn't say that it would be 10 years of a depression, but you likely see what I'm saying).

[Bigtime]

I heard that Concrete Equities is filing for bankruptcy today.

Edit: This was heard on QR77.

[Slava]

Originally Posted by Bigtime

I heard that Concrete Equities is filing for bankruptcy today.

Edit: This was heard on QR77.

I heard that someone bought them/their assets a few weeks or a month ago. I wonder how many of these real estate investment companies are going to drop over the next year.

[SeeGeeWhy]

^^^

Many.

[Flame Of Liberty]

Originally Posted by twotoner

People talk about more liquidity being pumped into the system. It isn't enough, most major banks right now are INSOLVENT. Even the phony stress tests showed this. Banks receiving money are hanging on to it. Even more telling, there aren't enough qualified borrowers available to lend to.

In fractional reserve banking (a system we have now), every bank, at any point in time, is insolvent by definition.

That's why some call such "system" a fraud...

[MoneyGuy]

Regarding high-yield bonds, don't be so sceptical. I'm looking at numbers of post-recession periods and times when spreads are over 1,000 basis points tend to be times when HY bonds do very well. In the last three of these recoveries, HY bonds have averaged 18% per year while stocks have averaged 10% in those same periods of time. Spreads were around 2,200+ and are now down to around 1,400 bps last time I checked, so well down from their peak a few months but still above the magic 1,000 mark. It's time, I'm telling you.

[Slava]

Originally Posted by MoneyGuy

Regarding high-yield bonds, don't be so sceptical. I'm looking at numbers of post-recession periods and times when spreads are over 1,000 basis points tend to be times when HY bonds do very well. In the last three of these recoveries, HY bonds have averaged 18% per year while stocks have averaged 10% in those same periods of time. Spreads were around 2,200+ and are now down to around 1,400 bps last time I checked, so well down from their peak a few months but still above the magic 1,000 mark. It's time, I'm telling you.

There are a few reasons that I'm skeptical, not the least of which is this:

High Yield Index Returns:

1990: (4.3)
1991: 34.6
1992: 18.2
1993: 17.2
1994: (1.2)
1995: 19.1
1996: 11.1
1997: 12.8
1998: 3.7
1999: 1.6
2000: (3.8)
2001: 6.2
2002: (1.1)
2003: 27.2
2004: 10.8
2005: 2.8
2006: 11.6
2007: 2.2
2008: (26.2)
2009, YTD: 17.1

While some of these numbers look good, common stocks would've outperformed in almost every year. Going by my memory (which is clearly a recipe for disaster as someone will call me on this!) high-yields outperformed common stocks once? Other than that you have a wild ride here and have to try to time things to do well.

I'm worried about the potential for defaults to come to bear on the year-to-date figure as well. Seems to me that in years past the default figure is around 20% in this space...surely throw in some credit issues and this risk has to increase?

[smith12]

18% on average for a hy bond? If I did that instead of putting money in stocks I would be down about 70% from what I've made since January.

IMO the stock market has still got a lot more room to grow this year and it on average will beat out any hy bond.

[Cowboy89]

Originally Posted by fotze

Hilarious. Just heard some hooting and there is a protest out my window down by the old murph's with fraud, felony and Scam signs protesting Concrete Equities. Hilarious.

Looking at the Concrete Equities page, shows the top two dogs names are both Vinny, shouldn't that give you a clue to not invest? When you name your kid Vinny, he is destined for a life of crime.

On top of being Named Vinny, it also serves people right for investing a sizable amount of money in something that you see an ad for while watching the morning/evening news.

[troutman]

http://concreteequities.com/about.php

Concrete Equities is the leading provider of Real Estate Investments around the globe. Giving investors an opportunity to obtain ownership in commercial properties the company has broken barriers in this area of investment and allowed motivated individuals to maximize profits while guaranteeing secure funds.

[Cowboy89]

Originally Posted by fotze

There was also that ugly dude on breakfast channel that read the financial news, wealthstreet or some other scammy sounding thing.

Sidenote anyone getting sick of those guys reading:

Oil up due to investor confidence in the economy
Oil down due to investor confidence in the economy

Mindless pointless drivel.

For me it's that guy's voice that makes me think scam! Either that or his ad that talks about gaining from world food demand that was airing before the market crash, during the market crash, and after the market crash and still on TV now.

http://www.wealthstreet.ca/about_us.aspx

Also interesting to note that he thinks that there is only one "Perfect Portfolio" allocation template as described in the link. As an aside interesting to know that the Wealthstreet guy Dave Jones is also the CEO of Concrete Equities.

[Cowboy89]

Originally Posted by fotze

I just googled wealthstreet and saw that.

There is a crazy thread from the scammed investors on canadianbusiness.ca. Brutal. Angry people.

The sad thing is I could have called this years ago. In fact I'm sure there was a post by me somewhere a while back mentioning Concrete Equities in this light. Bottom line is legitimate investment opportunities never come calling for you the retail person unless they are peripheral or extremely risky or all out fraud. So agreesive TV/radio advertising with phrases such as "You the smart investor" et al is a sure fire sign of a scam.

[Peanut]

Originally Posted by troutman

http://concreteequities.com/about.php

Concrete Equities is the leading provider of Real Estate Investments around the globe. Giving investors an opportunity to obtain ownership in commercial properties the company has broken barriers in this area of investment and allowed motivated individuals to maximize profits while guaranteeing secure funds.

THE leading provider? Really??

Although I note that blurb is from their own website, so...