Investing

Anyone else selling and moving to cash?

  • Last Updated:
  • Oct 13th, 2018 6:20 pm
Deal Addict
Jun 27, 2007
3883 posts
826 upvotes
IMO, there is no need to panic. Market got ahead of itself, too bullish aka Jan 2018 and is now due to correct. How low nobody knows.
But this is not the end of it. At some point, higher rates will kill equities, and it seems 2019 could be the year.
After spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: it never was my thinking that made the big money for me. It was always my sitting. Got that? My sitting tight!
Sr. Member
Feb 26, 2017
742 posts
334 upvotes
treva84 wrote:
Oct 5th, 2018 8:34 am
As bond yields go up, dividend yields go up correspondingly (meaning equity prices go down). If you could get a 10 year US Treasury at 3% that is basically nearly zero risk, why would you buy a dividend stock paying 3-4% yield? You wouldn't; so prices come down, yields go up.

In periods of declining rates yields come down (asset prices go up). Dividend stocks (in general) are going to face a massive head wind in the medium to long term if rates keep going up. Some (like financials) should buck this trend as they make a greater net income as rates go up. Others (utilities, telecos, like BCE) which are just basically bond surrogates, will get doubly punished as they tend to be heavily indebted as well.

As @Stryker is alluding to, one year is too short a time frame to evaluate your strategy.
I've been moving buying more low yielding or no dividend stocks this year (the two sectors I've bought the most in would be tech and industrials). I'm not really sure I want to buy more though as tech is pricey and Industrials are more cyclical and I might be buying at the peak. On the other side the bond proxy stocks like CU and BCE look really undervalued to me. After several recent buys I'm probably going to be in hold mode for a while.
Deal Addict
Jul 3, 2007
1180 posts
1274 upvotes
Toronto
Sanyo wrote:
Oct 5th, 2018 12:26 am
arent you a big rate hike advocate and want the real estate market to crash? what do you think happens to stocks over time when rates go up or threaten to go up...??? sure as hell arent piling in to bce or enbridge...
im not an advocate , just pointed out that higher rates were coming at some point ....

stocks and markets adjust over time to higher rates, my point is that the general performance of the tsx is poor , compared to the US

and thats mainly because our current government is anti business growth and energy pipeline use
Sr. Member
User avatar
Nov 4, 2016
551 posts
323 upvotes
You can see that in our salaries. The salary for the past 10 years more or less stayed exactly the same. And at the same period, the real estate and food prices has skyrocketed. The company's think they are winning by keeping salaries low. But the result is people are buying less of everything else. How can they buy when all their money went to food, rent and mortgage? Others, especially the most educated and brightest (genius level people), leaves Canada to work overseas for a higher pay cheque, some don't even bother paying their student loan. So now we also have a minddrain problem.
Best shopping deals I got from here:
Asus Zenfone 3 Zoom $300, ZTE Blade V8 Pro $175, Fluld 55' 4k TV $360
Deal Addict
Jul 23, 2007
3509 posts
1319 upvotes
From what I've seen, in general, as long as they are able to continue re-investing their dividend income into more dividend paying stocks North American investors have done quite well over the long term. That includes the inflationary time period between the mid 60's and early 1980's when bond yields were higher than the average equity yields.
Deal Addict
User avatar
Aug 4, 2014
1445 posts
465 upvotes
Toronto, ON
Stryker wrote:
Oct 5th, 2018 12:37 pm
From what I've seen, in general, as long as they are able to continue re-investing their dividend income into more dividend paying stocks North American investors have done quite well over the long term.
Yep, I don’t follow the strategy myself, but love reading MDJ updates for example:
Through a combination of deploying cash, continuing to build a new non-registered portfolio with savings, and collecting those juicy dividend increases, this quarter has been productive with a 9.32% bump in dividend income. I really do enjoy watching those dividends flow into the accounts.

Not only do I enjoy watching the dividends flow into the account, I’m a big believer in compounding returns (see how compounding can make you rich). In other words, the dividend cash is deployed to income-producing stocks which then further increases the income of the portfolio, which is then used to buy even more stock. See how compounding works? It’s only a matter of time before the snowball grows a mind of its own.

As previously mentioned, I welcome corrections/volatility as it gives investors in the accumulation phase a chance to buy quality companies (or index ETFs) at better prices, potentially increasing long-term returns. My plan is to continue this pace and hit at least $43k in dividend income for the next update and $45k by the end of 2018. We shall see!
https://www.milliondollarjourney.com/fi ... income.htm
Jr. Member
Oct 21, 2016
181 posts
28 upvotes
Some bounce back tomorrow hopefully nasdaq and S and p index looking good after hours over 1 percent hope the all cash bought some during this dip
[OP]
Deal Addict
Oct 14, 2004
1307 posts
302 upvotes
Toronto
I wish I had taken my own advice and acted on instincts. Oh well...
Deal Addict
User avatar
Aug 4, 2014
1445 posts
465 upvotes
Toronto, ON
James_TheVirus wrote:
Oct 12th, 2018 7:55 am
I wish I had taken my own advice and acted on instincts. Oh well...
Don’t worry, you might get plenty more opportunities to act on instincts - and then regret sitting with cash while the markets are marching higher :) Our portfolio is ~43K off September highs, yet “no rugrats”.. :)
dlhunter wrote:
Oct 5th, 2018 9:06 am
IMO, there is no need to panic. Market got ahead of itself, too bullish aka Jan 2018 and is now due to correct. How low nobody knows.
But this is not the end of it. At some point, higher rates will kill equities, and it seems 2019 could be the year.
Member
Dec 17, 2009
354 posts
13 upvotes
I actually disagree and I think that sometimes you should listen to your instincts.
Deal Addict
User avatar
Aug 4, 2014
1445 posts
465 upvotes
Toronto, ON
@rohit91, you might want to read “The Undoing Project: A Friendship That Changed Our Minds” by Michael Lewis
Forty years ago, Israeli psychologists Daniel Kahneman and Amos Tversky wrote a series of breathtakingly original studies undoing our assumptions about the decision-making process. Their papers showed the ways in which the human mind erred, systematically, when forced to make judgments in uncertain situations. Their work created the field of behavioral economics, revolutionized Big Data studies, advanced evidence-based medicine, led to a new approach to government regulation, and made much of Michael Lewis’s own work possible. Kahneman and Tversky are more responsible than anybody for the powerful trend to mistrust human intuition and defer to algorithms.
Or a simpler exersize (definitely helped me get read of the illusion that I’m very intuitive and learn to listen to a reason :)): every time your “instincts” tell you to do something, write it down - and revisit in a year. Sometimes you might be right, that’s for sure - and human mind tends to remember only those times.. :)
Deal Addict
User avatar
Aug 4, 2014
1445 posts
465 upvotes
Toronto, ON
So, how old is this bull? Some believe it’s still pretty young:
Bull markets, as I have noted in the past, typically last 7-17 years FROM THE BREAKOUT POINT (i.e. the old highs). The recent breakout point to start our count for the current bull was 2013. Thus, we are 5 years into the bull –less than the historic length for most bulls.
...
Moreover… big, bad, horrid bear markets are brought on by rampant stupidity via purchasing stocks with no earnings (the 1999 tech bubble), or severe stupidity in thematic investing and leverage (the 2007 subprime and oil bubble) or massively over extended stock valuations in can’t go wrong stocks like the “Nifty Fifty” stocks. FYI–these were the stocks that went wild, and proceeded the sideways/ multi-bear market period of the 1970’s. None of those conditions exist at this time.
https://www.valuetrend.ca/acting-like-a-scout/

(I’ve been reading his blog for a few years now - sometimes he gets it right.. :))

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