The latest market collapse

[transplant99]

Just an FYI...the Feds in the US have lowered the rates on banks borrowing rates from 6.25% to 5.75 %.

A move that should really spur the housing market back in the right direction.

http://money.cnn.com/2007/08/17/news...ex.htm?cnn=yes

[Flames in 07]

Originally Posted by transplant99

Just an FYI...the Feds in the US have lowered the rates on banks borrowing rates from 6.25% to 5.75 %.

A move that should really spur the housing market back in the right direction.

http://money.cnn.com/2007/08/17/news...ex.htm?cnn=yes

yeah, it will be interesting to see how the BofC will respond. They have suggested they have cancelled their 25 pt increase in Sept, would be nice to see if they lowered by 25 pts as a response.

Cdn should be strong vs USD today.

[Lurch]

Just a note - the US rate reduction is not the overnight rate, which is the typically reported rate. I don't know nearly enough about the US banking system to have a real opinion, but from what I've read this is not a big deal other than it signals the Fed is willing to take an action. I think the markets are taking this as a signal the Greenspan put is still available, though I guess now it should be known as the Bernanke put.

Decent article from a few days ago.
http://www.chron.com/disp/story.mpl/...y/5054959.html

[Regorium]

Originally Posted by transplant99

Just an FYI...the Feds in the US have lowered the rates on banks borrowing rates from 6.25% to 5.75 %.

A move that should really spur the housing market back in the right direction.

http://money.cnn.com/2007/08/17/news...ex.htm?cnn=yes

What bothers me is that the economy at times feels so artificial.

The big players doing badly? No problem - the feds will bail them out. We still all know that the American economy is in the gutter at the moment yet as long as the big banks and companies need money the feds will continue pumping everyone with cash.

Who loses? The people that don't have the inside connections to know all of these wheelings and dealings, and people that don't have the capital to make well informed investments in the stock market.

[transplant99]

I don't know nearly enough about the US banking system to have a real opinion, but from what I've read this is not a big deal other than it signals the Fed is willing to take an action

Agreed it is more symbollic than substance, but what it does do is allow liquidity to lenders to get more $$ into circulation and spur an industry that has become stagnant.

Basically this is the rate that banks pay when they borrow money from the feds....basically.

[Slava]

Originally Posted by Regorium

What bothers me is that the economy at times feels so artificial.

The big players doing badly? No problem - the feds will bail them out. We still all know that the American economy is in the gutter at the moment yet as long as the big banks and companies need money the feds will continue pumping everyone with cash.

Who loses? The people that don't have the inside connections to know all of these wheelings and dealings, and people that don't have the capital to make well informed investments in the stock market.

And with this you pretty much understand the value of the mutual fund and why it was created in the first place. Rather than a guy investing a few thousnad bucks and trying to be diversified you pool your money with other like minded investors and have some buying power through a fund manager.

[burn_baby_burn]

Originally Posted by Lurch

Or you buy an ETF and pay about 1/10 the management fee without a charge (other than $20 to buy through your brokerage account). There are now ETF's that track just about every sub-index or commodity worldwide, and they have tiny management fees (typically about 0.2% for the ones I own). It is very hard for a fund to outperform an ETF over the long term, and the flexibility an ETF provides is also nice IMO. I personally find them very handy to get exposure to markets where I don't have the time/inclination to investigate individual stocks, as opposed to mutual funds which I have purged entirely from my portfolio.

Can you explain what an ETF is exactly?

[Lurch]

Originally Posted by burn_baby_burn

Can you explain what an ETF is exactly?

An ETF is a form (of sorts) of a mutual fund that trades like a stock - for most purposes, think of them as a stock that represents a group of stocks such as the TSX Index. They typically have very low management fees, and are not usually (ever as far as I know but there are literally hundreds so I don't want to be inaccurate) actively managed (which is what mutual fund salesmen will try to sell you on as the benefit of a mutual fund).

As far as I can see the only reason you'd choose a mutual fund over an ETF is if you are a small investor that puts say $100/month into your RRSP. Since an ETF is a stock, you need to buy it through an online brokerage - $20 per transaction. However, since you save 2% per year in management fees (for example) and there is no load front or back, it does not take a whole lot of time or money to come out ahead, IMO.

I've heard, though never seen an actual, legitimate study, that ETF's are also more tax efficient if held outside an RRSP than the average mutual fund. Based on their structure, it makes sense to me, but again this is only a loosely based statement. If held in an RRSP, it doesn't really matter.

Finally, for those that like to fool around with options, you can short ETF's, use put and calls, etc on ETF's since they are stocks, which is not possible with mutual funds.

[Regorium]

http://biz.yahoo.com/hftn/070817/081...tune.html?.v=2

That article basically sums up my thoughts.

[BlackArcher101]

Perhaps I don't understand, but didn't this whole thing start with cheap credit being available to everyone? Now they decide to make the credit even cheaper? I don't see how this will help this issue, just mask it?