Black Monday v 3.0 Today

[Nehkara]

TSX now down over 600 points.

[MoneyGuy]

Originally Posted by FurnaceFace

Why does this piss you off? Was this a long term or short term investment? If it's long term then who cares, it'll move higher at some point and you'll make money. If it's short term then I would hope you put it into something with lower risk or you put it in there with eyes open you could lose money.

I think the important thing to note is drops like this happen and by staying the course you'll do better. I'm not close to the securities industry anymore however I believe there are a number of checks, balances, and triggers now in place which prevent a 1929 scenario so I'm personally not worried about losing everything.

Best approach I ever learned and am fortunate enough to be able to follow is tossing money in every month. I'm a big believer in dollar cost averaging and a big believer in letting the experts deal with my money. I've found someone I trust and I let him move things around as him and all the experts behind him see fit based on the parameters I'm comfortable with.

Happy buying!

This is very good advice. I'd give you rep if I could.

I'm way older than just about anyone on this site and have a portfolio...let me say well into the high six figures. Although I'm in my 50s I don't stress about this one little bit. I'm adding over 20K a year into my portfolio so this is an opportunity to buy more good investments that happen to be down at the moment.

And as for being pissed at buying recently and then seeing this carnage, how about my story. The wife and I have a leveraged portfolio of over 150K. It was less than that but we added a big amount in late 2001 when I got thinking that the millenium correction was about due to be over. I misguessed it by about 10 months and the leveraged money I put in fell along with the rest of my portfolio. I'm talking a lot of money and probably a lot more than the poster who mentioned being pissed is talking about. Did I wish I had waited a few months? Yes. However, no one knows the bottom so it's better to get in a bit early than to miss the recovery by buying too late.

On one hand I enjoy this thread but on the other hand I don't understand why guys in their 20s and 30s as I'm sure most of you are are so concerned about this market downturn. If gasoline prices fell by 15% would you be complaining? Both gasoline and investments are a commodity and both are better being bought at cheaper prices, so relish the opporunity. As long as you don't need your money for many years, this is a good thing.

[Leeman4Gilmour]

Well, I know one thing. The next time the Red Wings are unable to sell out their building, I'm increasing my cash position in order to take advantage of the soon to come market crash/correction.

[MoneyGuy]

I'm in the business so get stuff sent to me daily. Here is part of today's market report. Mods: This is a very part of the entire article.

The Toronto stock market plunged almost 5%Monday in one of its worst one-day losses ever as investors judged a U.S. economic stimulus plan announced on Friday as not enough to keep the U.S. from sliding into recession. [/font]
The S&P/TSX composite index closed down 604.98 points or 4.75%, to 12,132.14.
Investors also worry about fragile credit markets while analysts say it's very difficult to see a bottom to a series of declines that have sent global indexes down sharply this month.
"It's going to be something that will have to be waited out over time, and we're going to have to see some positive data come out before people regain confidence, and that's really what's missing here is confidence," said Gareth Watson, associate director of Canadian equity adviser at Scotia McLeod in Toronto.
"Investors just don't have any confidence at all and when we start to get that confidence restored -- which could easily take at least another six months minimum -- I don't think people are expecting a sustainable material rally in the marketplace."
The U.S. stimulus plan calls for about US$145 billion worth of tax relief to encourage consumer spending but some say it's too little, too late and instead want the U.S. Federal Reserve to cut interest rates aggressively at the end of this month.
The Toronto market posted a similar point loss on Feb. 16, 2001, when the tech bubble was bursting and Nortel Networks -- then a market heavyweight -- announced a disappointing profit forecast along with the elimination of 6,000 jobs. But the main index stood at around 8,400 points in those days, so the percentage loss was much worse -- 6.4%.




My comment:
Remember, the more it falls the more likely the recovery and the sharpest declines tend to be followed by the sharpest recoveries. Also remember that this is a buying opportunity.

[tvp2003]

Originally Posted by MoneyGuy

My comment:
Remember, the more it falls the more likely the recovery and the sharpest declines tend to be followed by the sharpest recoveries. Also remember that this is a buying opportunity.

BUY BUY BUY!

Umm... what should I be buying?

[return to the red]

Originally Posted by MoneyGuy

This is very good advice. I'd give you rep if I could.

I'm way older than just about anyone on this site and have a portfolio...let me say well into the high six figures. Although I'm in my 50s I don't stress about this one little bit. I'm adding over 20K a year into my portfolio so this is an opportunity to buy more good investments that happen to be down at the moment.

And as for being pissed at buying recently and then seeing this carnage, how about my story. The wife and I have a leveraged portfolio of over 150K. It was less than that but we added a big amount in late 2001 when I got thinking that the millenium correction was about due to be over. I misguessed it by about 10 months and the leveraged money I put in fell along with the rest of my portfolio. I'm talking a lot of money and probably a lot more than the poster who mentioned being pissed is talking about. Did I wish I had waited a few months? Yes. However, no one knows the bottom so it's better to get in a bit early than to miss the recovery by buying too late.

On one hand I enjoy this thread but on the other hand I don't understand why guys in their 20s and 30s as I'm sure most of you are are so concerned about this market downturn. If gasoline prices fell by 15% would you be complaining? Both gasoline and investments are a commodity and both are better being bought at cheaper prices, so relish the opporunity. As long as you don't need your money for many years, this is a good thing.

I guess pissed was the wrong word to use. I'm the kind of guy that gets mad if I miss an opportunity to make an extra $50 but I'm also not afraid to gamble. I guess I should say I'm diappointed that I didn't make that extra $1000 or so but hindsight is 20/20 and I'm in it for the long haul anyhow

Being only 28 I have learned to invest wisely and have accumulated a fair share thus far in my young career

[MoneyGuy]

Originally Posted by tvp2003

BUY BUY BUY!

Umm... what should I be buying?

I'd dollar-cost average into equities, with an overweight on foreign content. For higher-risk money, I'd be looking at technology, but I'd DCA in for smaller amounts. Tech may be the most undervalued sector right now. I'd also look at banks for a 3-5 year hold. I'd try to underweight bonds. This is what I'm doing.

[tvp2003]

Thanks... I realize my question was extremely vague so it was mostly tongue-and-cheek, but it's always interesting to hear what (qualified) people have to say

Originally Posted by MoneyGuy

I'd dollar-cost average into equities, with an overweight on foreign content. For higher-risk money, I'd be looking at technology, but I'd DCA in for smaller amounts. Tech may be the most undervalued sector right now. I'd also look at banks for a 3-5 year hold. I'd try to underweight bonds. This is what I'm doing.

[Cowboy89]

Originally Posted by MoneyGuy

I'd dollar-cost average into equities, with an overweight on foreign content. For higher-risk money, I'd be looking at technology, but I'd DCA in for smaller amounts. Tech may be the most undervalued sector right now. I'd also look at banks for a 3-5 year hold. I'd try to underweight bonds. This is what I'm doing.

Very conservative of you. Not too sure if this has indeed bottomed out yet? If anyone thinks it has then pile in never mind with spreading your buying out and watch it rebound the next few weeks and then profit take in Feburary/March.

Of course this is an alternative for someone who isn't counting on that money anytime soon and would like to take a roll of the dice.

[Top Shelf]

That's it, I'm investing in Norway!

http://money.cnn.com/data/world_markets/

Lots of red on that link

[Canada 02]

the Nikkei has had the two worst days since the Asian Financial Crisis back in 1997. Down over 8% in two days

its going to be ugly in New York in the morning; Dow Futures down 400 points; Nasdaq futures down 60+

[Wookie]

Sweet, the CDNX (venture) was the biggest loser at 8.7% followed closely by the TECDAX Germans at 8.46%.

[Slava]

moneyguy has given some solid advice throughout this thread. We pulled the vast majority of our clients into cash positions a few weeks ago. I would suggest that things will still get worse before they get better.

If you are not dollar-cost averaging in at this point then preserving your cash is not the worst thing that you can do!

[Canada 02]

not including today (Tuesday)

Japan is down 17% year-to-date
Hong Kong is down 20%
Korea is down 15%
Australia is down 16%
China is down 10%

[Slava]

^ Fotze the scarier part is if you have loans where a margin call is involved.

[Canada 02]

the Dow is down about 9% YTD, but it could lose 5-6% at opening bell to catch up to Asian markets

likewise for the S&P 500

[Slava]

Originally Posted by fotze

What does that mean? Its never been clear to me.

It means that if you borrow $100k and buy stocks you have to add money if the value of the stock falls below a certain figure...say 90% or 75%. Basically at a time when the market drops like this you could have to add cash to the account. Terrifying if there was a mortgage involved IMO!

[Wookie]

Originally Posted by fotze

What does that mean? Its never been clear to me.

You borrowed against the stocks you already own or money in your account.

Usually your trade account can go to zero. That's awful - but if you're prepared for that.. well, you know how bad it can get.

But if you borrow agaist the equity you have and buy more, then you can go into the negatives. And keep going....

http://www.investopedia.com/university/margin/

A Buying Power Example
Let's say that you deposit $10,000 in your margin account. Because you put up 50% of the purchase price, this means you have $20,000 worth of buying power. Then, if you buy $5,000 worth of stock, you still have $15,000 in buying power remaining. You have enough cash to cover this transaction and haven't tapped into your margin. You start borrowing the money only when you buy securities worth more than $10,000.

This brings us to an important point: the buying power of a margin account changes daily depending on the price movement of the marginable securities in the account. Later in the tutorial, we'll go over what happens when securities rise or fall.

Here's how it works. Let's say you purchase $20,000 worth of securities by borrowing $10,000 from your brokerage and paying $10,000 yourself. If the market value of the securities drops to $15,000, the equity in your account falls to $5,000 ($15,000 - $10,000 = $5,000). Assuming a maintenance requirement of 25%, you must have $3,750 in equity in your account (25% of $15,000 = $3,750). Thus, you're fine in this situation as the $5,000 worth of equity in your account is greater than the maintenance margin of $3,750. But let's assume the maintenance requirement of your brokerage is 40% instead of 25%. In this case, your equity of $5,000 is less than the maintenance margin of $6,000 (40% of $15,000 = $6,000). As a result, the brokerage may issue you a margin call.
If for any reason you do not meet a margin call, the brokerage has the right to sell your securities to increase your account equity until you are above the maintenance margin. Even scarier is the fact that your broker may not be required to consult you before selling! Under most margin agreements, a firm can sell your securities without waiting for you to meet the margin call. You can't even control which stock is sold to cover the margin call.

Returning to our example of exaggerated profits, say that instead of rocketing up 25%, our shares fell 25%. Now your investment would be worth $15,000 (200 shares x $75). You sell the stock, pay back your broker the $10,000, and end up with $5,000. That's a 50% loss, plus commissions and interest, which otherwise would have been a loss of only 25%.

Think a 50% loss is bad? It can get much worse. Buying on margin is the only stock-based investment where you stand to lose more money than you invested. A dive of 50% or more will cause you to lose more than 100%, with interest and commissions on top of that.

[RougeUnderoos]

Originally Posted by fotze

Its so nuts how the US can bring the entire world down with it, I truely do not understand how it all works.

Well you're in good company, because I don't think anyone actually knows how it all works.

[Canada 02]

Originally Posted by fotze

I bet it wil be much worse than that, I'm guessing 13%, it has to make up for two days of crap

i believe the NYSE utilises circuit breakers to prevent gross volatility, but you may be right that it could get close to double digits. I'm basing my guess on market futures