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If Bank of Canada Lowers Rate This Week, Then What?
March 4, 2020
7:22 pm
Bud
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Dec 31, 2020 stock market predictions where will we be? Real estate?

March 4, 2020
11:37 pm
Loonie
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Brimleychen said
The central bankers have been pushing Canada to become Japan.

A couple of weeks ago, I read something about the Deputy-Governor saying that the BoC wanted to convince the govt to allow them to go to negative interest rates because they needed more 'tools".

I only saw this in passing, and when I tried to find it later, I couldn't.

Can anyone tell me if I read this right? I'm beginning to wonder.

If so, is this how it works? Does the BoC have to get some kind of permission to do this?

Poloz's term is up soon. The current Deputy-Governor could very well be the next Governor.

It all seems like a house of cards to me, frankly. These "tools" (screwdrivers) keep eroding our pocketbooks, and it is presented as helping us. It seems there will be no end to it.

March 5, 2020
5:55 am
Bill
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Savers are always at the bottom of the food chain, they are the ones who want zero effort and risk (so they pay for that) and just to provide their money for some other people to go off and do all the work to try to create wealth. Naturally they're going to be the last ones paid, my savings are of no use or interest to anyone unless they can go off and make even more with that money.

Without a productive economy it IS a house of cards, and there will be an end, always is. When all the "tools" have been exhausted (and novel ideas like "negative" interest rate suggest we're getting there) & debt is up to the sky then the money printing starts in earnest.

March 5, 2020
8:37 am
Bud
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Bill said
Savers are always at the bottom of the food chain, they are the ones who want zero effort and risk (so they pay for that) and just to provide their money for some other people to go off and do all the work to try to create wealth. Naturally they're going to be the last ones paid, my savings are of no use or interest to anyone unless they can go off and make even more with that money.
 

Its that attitude why they're at the bottom. A savers dollar deserves as much respect as Buffets dollar or a condo developers dollar. Savers deserve the same tax benefits. Until savers respect themselves nobody else will.

March 5, 2020
9:33 am
Vatox
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Loonie said

It all seems like a house of cards to me, frankly. These "tools" (screwdrivers) keep eroding our pocketbooks, and it is presented as helping us. It seems there will be no end to it.  

The people in power are like children. They want the big pile of candy and don’t think about how unhealthy it is for the body. There is no parent to stop them. Eventually, the pile of candy runs out and there will be no more “screwdrivers” to use. Unfortunately when we reach the bottom of the pile, the damage will have been done and the child is fat and ready to burst. POP

There is nothing wrong with lower growth or contraction. It may not taste as sweet, but it’s healthy.

March 5, 2020
10:31 am
savemoresaveoften
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Vatox said

The people in power are like children. They want the big pile of candy and don’t think about how unhealthy it is for the body. There is no parent to stop them. Eventually, the pile of candy runs out and there will be no more “screwdrivers” to use. Unfortunately when we reach the bottom of the pile, the damage will have been done and the child is fat and ready to burst. POP

There is nothing wrong with lower growth or contraction. It may not taste as sweet, but it’s healthy.  

contraction is never healthy.. At the minimum economy growth should match inflation rate.

When you see contraction or even worse deflation, everyone suffers ultimately. Deflation is what one must avoid.

March 5, 2020
10:40 am
Vatox
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savemoresaveoften said

contraction is never healthy.. At the minimum economy growth should match inflation rate.

When you see contraction or even worse deflation, everyone suffers ultimately. Deflation is what one must avoid.  

That thinking is why we are in such a pickle. The world seems to have forgotten what ”reset” means and why it is necessary. It will all correct itself eventually, but the longer it is avoided, the more pain that will be felt.

March 5, 2020
10:50 am
Bill
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bud, until savers respect themselves nobody else will. No, not really the reason for paltry return for savers. Actually low returns for savers is due partly to supply and demand (lots of people prefer to turn their money over to others for those relatively few others to create new wealth, i.e. lots of supply, vs relatively few that want to spend their time creating products or services that will create new wealth) plus the fact the producers of these products and services get the money from their customers first so make sure to keep the lion's share for themselves (generous pay and perqs, profits, dividends, etc) before paying the savers for the temporary use of their money. It's certainly more than that, but the point is it's about free market economics, about who creates new wealth and who gets first crack at it. Of course we are moving away from free markets to more gov't controlled economy here in Canada, so I'm guessing lots more "self respect" to come, you'll be pleased, but we'll see what happens to wealth creation under gov't-controlled economy. I'm guessing the 99% will not be happy.

March 5, 2020
11:10 am
Doug
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Loonie said

Brimleychen said
The central bankers have been pushing Canada to become Japan.

A couple of weeks ago, I read something about the Deputy-Governor saying that the BoC wanted to convince the govt to allow them to go to negative interest rates because they needed more 'tools".

I only saw this in passing, and when I tried to find it later, I couldn't.

Can anyone tell me if I read this right? I'm beginning to wonder.

If so, is this how it works? Does the BoC have to get some kind of permission to do this?

Poloz's term is up soon. The current Deputy-Governor could very well be the next Governor.

It all seems like a house of cards to me, frankly. These "tools" (screwdrivers) keep eroding our pocketbooks, and it is presented as helping us. It seems there will be no end to it.  

Loonie, it's a good question. I would say if it's not within the scope of either the Bank of Canada Act, associated Regulations, or the BoC/GoC inflation targeting framework agreement, then they'd probably need to get approval from the government to permit this. That said, the GoC frequently defers to the BoC on matters of monetary policy, so I would think if they recommended it, grounded in apparently sound reasons to do so, the Minister of Finance would put in place the necessary measures to effect such a change (could be as simple as amending the inflation-targeting agreement, which, presumably, would have to be gazetted, which would mean a 30-60 days public comment period).

I agree, with personal reservations, that the current Senior Deputy Governor, Carolyn Wilkins, is likely to succeed Poloz, barring some federal Crown corporation head or senior associate deputy minister of finance coming out of the federal millwork (perhaps I should say cabinet millwork? 😉 )

Cheers,
Doug

March 5, 2020
11:14 am
Loonie
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All economies run on borrowing and lending money, and always have.
Lenders don't expect the returns sometimes gained by "investors" or gamblers in the stock market etc. They do accept a lower return than that, but a return nonetheless.
When and if they are unable to get that, for whatever reason, the economy is in deep trouble, and everyone will suffer, no matter what you are invested in. Even the banks are complaining tat their spread is too small; ultimately that will affect bank profits and maybe even ultimately dividends. Now, if you want to talk about people who perceive no risk but expect high dividends with minimal taxation, it would be a whole lot of people who hold bank stocks. I believe there is risk, even in those blue chip, so-called, stocks, but a lot of people don't. Some have expressed as much on this forum.
There is risk no matter where you put your money, just different kinds and degrees of risk.

March 5, 2020
11:42 am
Doug
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Loonie said
There is risk no matter where you put your money, just different kinds and degrees of risk.  

+1 to this. It's often forgotten on here, it's useful to remind everyone once in awhile. 🙂

Cheers,
Doug

March 5, 2020
1:00 pm
Bill
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For sure, people should remember it's stating the obvious that there's risk whenever you hand your money to somebody else. But I do like to remind (inform?) anyone who cares that the stock market, which includes "safe" blue chips, lost about 90% of its value during the Great Depression and it took about 25 years to get back to its pre-Depression peak. Not many know that (or even about the Great Depression any more, that's depressing!), try and find a TSX chart via google that goes back more than 20 years or so, takes some digging (at least for me).

And don't forget, anybody who's expecting CPP or has an employer or other pension plan is likely in the stock market to a large degree, like it or not.

Having said that, I made exponentially more money with my bank stocks vs GICs over the decades I used to hold them, my temperament would be that of a bitter boy if I'd been mainly in GICs, particularly in the really low rate times of the last 15 years or more.

March 5, 2020
1:38 pm
Doug
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Bill said
For sure, people should remember it's stating the obvious that there's risk whenever you hand your money to somebody else. But I do like to remind (inform?) anyone who cares that the stock market, which includes "safe" blue chips, lost about 90% of its value during the Great Depression and it took about 25 years to get back to its pre-Depression peak. Not many know that (or even about the Great Depression any more, that's depressing!), try and find a TSX chart via google that goes back more than 20 years or so, takes some digging (at least for me).

And don't forget, anybody who's expecting CPP or has an employer or other pension plan is likely in the stock market to a large degree, like it or not.

Having said that, I made exponentially more money with my bank stocks vs GICs over the decades I used to hold them, my temperament would be that of a bitter boy if I'd been mainly in GICs, particularly in the really low rate times of the last 15 years or more.  

All very true points as well, Bill. Agree completely with all of it. Do you hold some MAW104 and/or single-ticket asset allocation ETFs like AltaRed and Briguy, by chance?

Cheers,
Doug

March 5, 2020
9:10 pm
Bud
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Bill said
Having said that, I made exponentially more money with my bank stocks vs GICs over the decades I used to hold them, my temperament would be that of a bitter boy if I'd been mainly in GICs, particularly in the really low rate times of the last 15 years or more.  

Bill u gave us that line before. The entire global banking system failed in 2008/09. Many of the biggest banks across Europe and some in the U.S. Citi BkAmer. have yet to fully recover. Many of the ones that survived cut their dividends in half. Bank of Canada looked after its banks at the time.

March 6, 2020
7:43 am
AlainJF
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picassocat said
... I sold all my stocks at the right moment and I’m not buying-in for now: there is a time to buy, a time to sell and a time to hold. It’s time to hold.

.... I know there are good stock prices out there, but don’t rush to the market just now, wait.

It’s like a waterfall, there the high fall, (correction) a splash (markets try to rebound) then a slow trickle down to the lake. Wait.

Good for you if you sold your stocks at the right moment !

I like your simple "Waterfall + Splash + Trickle Down" analogy, which seems to be true at this moment...

Any other simple analogy to share, from your wisdom, about when will be the time to buy ?

March 6, 2020
8:45 am
canadian.100
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AlainJF said

picassocat said
... I sold all my stocks at the right moment and I’m not buying-in for now: there is a time to buy, a time to sell and a time to hold. It’s time to hold.

.... I know there are good stock prices out there, but don’t rush to the market just now, wait.

Any other simple analogy to share, from your wisdom, about when will be the time to buy ?  

Once the corona virus appears to have stabilized/under control, no doubt stocks will rebound. The major reason for the stocks falling this time is mainly due to the uncertainly created by this new epidemic and not knowing how long or how severe the effects on the economy will be. Many companies will suffer (travel industry-airlines, hotels etc. (many may not - healthcare, grocery etc.) but prices will rebound once things return - the epidemic will end - it is just not knowing when that will be that has created the present situation. My guess is that prices of high dividend highly profitable blue chips like the Cdn Banks, Insurance companies, Communications eg BCE, Telus etc. plus others will recover very quickly.

March 6, 2020
7:12 pm
Bill
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Doug, I hold MAW105, it's pretty much all I've got in the markets at my age. Been pretty lucky/fortunate investor for a long time and now I'm no longer active in markets, more than met my financial goals and don't need any more growth.

bud, I don't know much about what happened to US or Euro banks 12 years ago, I was just in Canadian financials during my investing years. But I do know the streets and towns during that time looked nothing like the books I read about the 1930s, so to me that was fake news financial crisis, Starbucks-ification of our lives of ease has continued unabated since then, at least in North America, from what I can tell.

March 6, 2020
9:05 pm
Norman1
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What happened to the US banks is not really important except to those who had 100% of their portfolio in the US banks.

In contrast, those who invested in a broadly diversified portfolio, like the S&P 500 index that included US banks, did very well from end of 2007 to end of 2019.

Such investors nearly tripled their investment, in spite of any losses in their US bank stocks. The S&P 500 total return was +182% (+9% compounded annually) from end of 2007 to end of 2019:

Year Annual Cumulative CAGR
2008 -36.55% -36.55% -36.55%
2009 +25.94% -20.09% -10.61%
2010 +14.82% -8.25% -2.83%
2011 +2.10% -6.32% -1.62%
2012 +15.89% +8.56% +1.66%
2013 +32.15% +43.47% +6.20%
2014 +13.52% +62.86% +7.22%
2015 +1.38% +65.11% +6.47%
2016 +11.77% +84.54% +7.05%
2017 +21.61% +124.42% +8.42%
2018 -4.23% +114.93% +7.20%
2019 +31.22% +182.03% +9.02%

Sadly, lots of people seem to be so obsessed by the losing stocks that they are blind to the spectacular winners.

March 9, 2020
8:22 am
Doug
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Norman's post above at post # 38 is great. I have nothing further to add to that.

Just bumping this thread to say that there is now futures market speculation of a potential further 50 bps BoC Policy Interest Rate cut at, more likely, its April 15th meeting and, less likely, at an emergency meeting before then.

Economists and analysts are also increasingly calling for a BoC rate 1% lower from the current 1.25% by year's end, to 0.25%.

The potential for 0% and even modestly negative rates (-0.25% to -1.00%) by next year has increased significantly.

I expect the GoC to allow the BoC to do modestly negative rates for the short to medium term.

Any rate drops in deposit rates have been not fully priced in the first 50 bps cut. In short, we're likely to see the Manitoba CUs' interest rates at 1.25% by end of year. Motive Financial and LBC Digital are likely going to 1.75-2.00% by end of year. You heard it here first. sf-cool

Cheers,
Doug

March 11, 2020
2:16 pm
Winnie
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Yes, yesterday Bank of Montreal also predicted BoC rate of 0.25% after June 03, 2020 or even sooner at an emergency meeting.

Lucky me, it will not affect me much, because from the last year I only have less than 10% of all my assets in cash.
More than 90% is physical gold, I completed all my transformations to gold last year and only in 1 year (from March 2019 to March 2020) gold price increased approx. 20%, not bad at all.

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