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Discussion Starter #1
Equities bouncing off lock limit down, West Texas off by 30%, RBOB 21%, basically a bloodbath. Grains are getting chewed on but they are doing better than most of the others. For those north of the 49th CAD is down 1.6% which will help to ease the pain.

Bond yields are dropping dramatically and organically, even some of the talking heads are starting to whisper the deflation word. Fixed income has been screaming this for some time now but nobody has, or has been willing to, listen.

The collapse of OPEC+ has potential to leave a giant crater in the fixed income markets. Oil at 30 (some analysts are talking 20) will decimate the shale producers in North America should the drop hold. Shale producers make up 10% ish of the high yield bond market. That value can be figured out but nobody really knows how many derivatives are tied to these bonds or who holds them.

Things are getting interesting.
 

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It looks like something might have been set to buy everything at -7% after the NYSE pause, I wonder what that could be.

 

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I watched an interview. One expert predicts a likely 40-70% of world adult population to get Corona. I would say that is likely. So.... If you are older with weak lungs, it may be good advice to start avoiding all people and outside anything for a while. These predictions are causing huge market fears.

 

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That magic word - derivatives. Apparently a key and necessary component of our financial system. Seems more like a casino to me but to those who enable it we must beleive it is important. However derivatives don't fare well when unprecedented moves happen. They tend do work well when the future is pretty well known, even if moving in a certain direction. I would say Russia and Saudi Arabia certainly threw a wrench in there. Maybe that's why the OPEC cartel stayed for 60 years. Interesting that we demand a cartel to also be an important part of our financial system and play a key role in the world economy. Who knew cartels that controlled the price of energy were a good thing.
Along with derivatives we can also include ETFs to the mix. Good thing those were dreamed up. Great when the markets go up, not so much when you think you and few others want to get out. ETFs get complicated there.
But all is well. Stocks and futures are all based on supply/demand and fundamentals. That is how our capitalist economy works. So after this tantrum what ever things were priced at before is where they will bounce back too. They have too, otherwise you have to think there is a lack of reality at work. Free markets are the definition of reality and seek it out. Now, if the markets aren't as free as we think then we have a concern.
 

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As long as there is a futures market it can be manipulated. Look at the amount of futures contracts and then compare the actual physical amount
 

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Discussion Starter #7
bear flag hit the 23500ish mark on DJIA, almost perfect chart pattern on the daily.
 

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Discussion Starter #8
If anyone is following the trade volume today makes this one real. Lots of the downward energy is burnt off but the prognosis medium term appears negative.

Good book on assessment of volume in the market : volume book

23 billion shares traded hands on NYSE today.
 

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Discussion Starter #9
The other thing to keep in mind is that for the last 10+ years the vast majority of the markets rise has not been organic. The biggest contributor has been companies borrowing money to buy their shares back. This has resulted in much larger corporate debt (made easy by loose monetary policy). These things fall apart once your debt costs rise. Debt costs rise when your rating falls. An easy way to have your ratings fall is to have your share price drop, which drops your net worth and messes up your debt to equity status.

The equities market is a sideshow. The real story is, and will be, in the fixed income markets.
 

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So the question is: Where's the best place to have money already invested right now...Farm land?, Gold?
 

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Discussion Starter #12
If we are hitting a deflationary point understanding which assets and positions are a positive in this environment is important. Remember that, despite what the talking heads say, cash is a position.

The biggest loser in a deflationary spiral (if that is what we are facing) is the .gov. The decline in the velocity of money hits them the hardest. Figure out what they are going to do and get infront of it or be able to dodge it.

I just went by the gas station and the price is still 98.9. If this keeps up the refiners might have a blowout quarter or two. Option prices with the vix at 45 will suck so they are probably out for a while.
 

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Shmiffy and lander have hit a couple key points. And also why I think charts are useless, though no doubt the free markets coincidentally follow some lines on a chart.

If you have unlimited futures contracts available then you really don't have a direct link to supply/demand of the actual commodity. And if you don't have that, then what do you have. And when demand goes up and more contracts are created from nothing to represent that commodity then how can you say you are accurately reflecting supply/demand. And if that is true, how is one allowed to create more contracts in the first place if there is no evidence that the quantity of the commodity is available to satisfy the contracts. And the answer is - well, that's how it has always been and if it was wrong it would have been changed.

And then we can get into stock price valuations and a capitalist system where, apparently, good business is to take on debt to both buy back your own company which is not generating any profit (because taking on debt shows that) and also to pay dividends on a company which, oddly enough, is not turning a profit because you are taking on debt to pay the dividends. When you talk of key component of capitalism being the proper use/investment of capital, where exactly does debt to pay dividends and buy back shares fit in here?

But don't mind all that. We all understand these things and are shocked when stock markets go up and down. And we pile into ETFs with no management at all because none is needed. Everything goes up. Debt to buy shares says that is true. If things go down, then ETFs get dicey. And we also have ETFs that buy companies in a stock exchange that also list the ETF on that same exchange, so they kind of compound the growth and contraction. But all desired and good to make sure citizens can participate in free market capitalism.

As to where to invest? Who knows. When you figure out where the free markets are and where capitalism along with supply/demand principles are at work then you should be able to figure it out. Then pile in your investments accordingly.

My tin foil hat says the stock markets won't actually crash though. I have a suspicion there may be a guiding hand to keep your typical working smuck from being crushed because his life's work is piled into a gamed system because inflation destroys it other wise. On the other hand, I doubt it would be too hard to steal most of the guys wealth if the same guiding hand chose to. 2008 was an example of that on what would certainly be a comparatively small scale if it occurs again. What have the people who create these environments done to ensure 2008 does not occur again. One can hope those people aren't in charge anymore.
 

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Watched BNN news channel Monday night just to see the stock tickers scroll by. The only company of all listed (two rows of tickers) with a green arrow was Dollarama. Don't know how many hundred companies scroll through. 10% down was average. So there is definitely a lot of reactionary stuff occurring with no reason. Low energy prices are actually good for most businesses. So now you need to figure out if there are deals to be had or if things were over valued in the first place. And the tricky part is inflation dictates prices go higher just because of that alone. What was fair price 20 years ago needs to be adjusted higher today for inflation of the money supply alone.

I am not adjusting anything. Lots of RRSPs and self directed pension from years of employment. Fairly conservative going into this but was light on energy and banking sector. I don't think oil has to come up at all. Usually a cartel is not an accepted means to guarantee low price of anything. If OPEC ceases to exist I would personally not pile into oil companies on the assumption oil needs to bounce back to a certain threshold. That's just me. We have our opinions and conduct life accordingly. If globalization ends and Canada decides it has a big enough oil demand internally to supply itself without exporting oil to then import oil from the other side of the planet to fill local demand, well then we might see some rationality in local cost of crude and perhaps a rise. But in a world where we export oil off one coast and to the US while import it on the other and then say our oil must be priced lower because it costs so much to pump to the US yet sell locally at international price then I won't bet $50 oil must be the minimum.

Lander also made a good point about government revenues. Don't know how many people think about that. The government has a vested interest in keeping things inflating. At least a Socialist government does. A right wing government that is true to its roots and lives within its means must adapt to lower revenues. It can even provide tax breaks. It just means smaller government and less spending on things outside its core mandate as defined by right wing thinking. Naturally anyone promoting socialism will howl at such an idea. Any government that stands down without automatically jumping up to inflate at all costs is not necessarily bad.

But we will see how many people who consider themselves right wing will pile into the stock markets that are down while demanding the government unleash policies and insist central banks step in to reflate everything. Your retirement savings depend on it. Funny how right wing people can be controlled, led and even converted into hardcore socialists. Kind of like demanding your government pay out huge incentives, cost sharing, tax holidays to big corporations to build oil infrastructure or bail out corporations to protect jobs while saying you are a hard line right winger. Perhaps the proper government will find a balance between reflation and protecting retirement savings, or just protecting citizens wealth in general.
 

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Discussion Starter #17
Markets having another bad night. Nothing lock limit at the moment but they are not too far off. Everyone getting their heads around the travel ban. It could be an interesting open.
 

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So in the stocks we have had a Black Monday, Tuesday, Wednesday, Thursday. We have a Black Friday, but that refers to the sale after Thanksgiving.
Think after Trumps announcement we will have a Black Friday for the stock market too.
Airlines first, fuel supplier to the airlines next and then hold hold onto your shorts.........
 
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