Investing

Market timing step 2: going back in

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  • Nov 27th, 2020 3:18 pm
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freilona wrote:
Damn - “should’ve purchased (tm)” ZCM (BMO Mid Corporate Bond ETFj right away! Up 2.35% on this news I guess:

“In its regularly scheduled interest-rate announcement, the bank unveiled a Provincial Bond Purchase Program to buy up to $50-billion. It also announced a Corporate Bond Purchase Program, under which it will purchase up to $10-billion of investment-grade corporate bonds in the open market.”

Bank of Canada unveils new bond-buying programs in bid to support credit markets amid virus crisis

Although ZIC is up, too.. sigh
MrMom wrote: @freilona ETF market getting ahead of the underlying. No details. Will it include Fins? Spread between Bid/Offers have not moved because this is all hypothetical. More thoughts here.

BTW, I'm in your camp now, had some posts removed. Probably for calling out the trolls.

I'll update this post with a chart of CDX spreads later.
A portfolio of select 5Y and 10Y NA (think US) credit. Lower spreads = bullish.
Poloz saying 1 to 5 year corporates. The bucket that generically has the least credit risk, but think again why this bucket. Bucket = street term for "maturity bucket" or a certain range of maturity dates. Think the same reason as my apple basket analogy. If you can keep the basket from overflowing, then there is room for other risk across the curve.

For the same sized basket, the risk gets fuller with longer dated and riskier big apples rather than shorter dated, smaller apples. Why might the basket be getting full? There's been some bond borrowings through this with the recent large TD NVCC deal as an example. Typically, investors will sell shorter dated credit to move out the curve. There are other reasons, but they may not be as important.

Conclusion: All else being equal, although they never are, the credit curve might steepen. 1 to 5 year corporate spreads tighter with > 5 year spreads wider.
Last edited by MrMom on Apr 16th, 2020 6:08 pm, edited 1 time in total.
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freilona wrote: Here’s the target asset allocation I planned earlier for 2021 (reallocating ~20% that were in GICs and bonds ETFs back into equities, while keeping a healthy non-investable “cash wedge” aside):

10% GICs
10% Global Bonds
5% Preferreds

15% Canadian

18% Developed
7% Emerging

35% US

So.. stick to the plan - or back to the drawing board? :)
This looks like a perfectly good portfolio to me. I'm not clear from your post as to what changes you are now considering making to it?
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MrMom wrote: Conclusion: All else being equal, although they never are, the credit curve might steepen. 1 to 5 year corporate spreads tighter with > 5 year spreads wider.
Thank you, @MrMom ! I’m leaning towards selling ZCM in my RRSP (instead of buying more of it in LRSP) It’s only ~2% of the overall portfolio, and is currently slightly above my average purchase price. I’ll keep ZIC (US corporate mid-terms) in husband’s RRSP for now (5%+ of the overall portfolio, up 14%+ - mostly thanks to fallen CAD, which was the hope when buying unhedged) and 2 individual bonds to maturity.

I wasn’t hot on VAB and ZAG even before seeing them drop in March, and would rather buy another GIC than a bonds ETF with unpredictable behaviour and paltry YTM. Will be checking individual bonds as well :)
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llpresident wrote: This looks like a perfectly good portfolio to me. I'm not clear from your post as to what changes you are now considering making to it?
Thank you :) It’s pretty close to our previous asset allocation until last summer when I got jitters and started decreasing equities allocation. Here’s our current actual asset allocations (including upcoming DB pension transfer):

12.5% Cash (only in my RRSP and new LRSP)
14.8% GICs
8.3% Global Bonds
4.1% Preferreds

7.1% Canadian (2.8% ETF, 4.3% in 4 individual stocks)

15.4% Developed
5.5% Emerging

32.3% US

Theoretically, I could just buy bonds and/or GICs with that cash and we’d have a balanced 40/60 portfolio “as is”. But if I want to start increasing equities allocations back to 75%+ - do I really want to buy more of Canadian, Developed and Emerging Markets equities, not just US ones? Do I still believe that “one day” in the next 5 years one of those markets will outperform the US? Last 5 years they didn’t. And I know it’s an unpopular notion among indexers to go ‘all-in” US, but I’m not the only one on the forum at least overweighing them before, so considering bringing US equities allocation to up to 50% of the overall portfolio :)

I wish I had guts to get rid of preferred shares at the losses. But hopefully will at least sell them in registered accounts and buy in non-registered when non-reg GIC matures.

Also considering buying REITs (individual or an ETF) in the LRSP account - to bring Canadian allocation up to 10%.

And oh yeah, sell ZCM.. So 2021 target allocations will become more like this:

10% GICs
7% Global Bonds
3% Preferreds

10% Canadian

15% Developed
5% Emerging

50% US

(Once again, we have no debts, enough cash set aside for about 3 years of modest living expenses, our RRSPs are maxed, so all future DIY contributions will be TFSAs and non-reg)
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@freilona In RORO environments.correlations go to one.

Credit spreads should be tighter if the GILD led rally continues into RTH. DK what the underlying Rates market will do though. Here's the correlation chart of ZCM vs SPX. High recently.
http://schrts.co/VXzeysfr

Update
Last edited by MrMom on Apr 17th, 2020 12:27 am, edited 1 time in total.
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The BIS published this on April 2, "Leverage and margin spirals in fixed income markets during the Covid-19 crisis," three weeks after the twittersphere had figured it out.

I've updated the "Why does it appear to Main St that the Fed is only helping Wall Street?" post where I used apples to explain the bond market gyrations. Hopefully it all makes sense now on why the Fed needed to step in back then. If you understood the apples, the full BIS analysis will be a piece of pie.

I'll post the BIS url in the initial post.
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freilona wrote: So 2021 target allocations will become more like this:

10% GICs
7% Global Bonds
3% Preferreds

10% Canadian

15% Developed
5% Emerging

50% US
That’s not too far off my current portfolio other then my very small developed markets and more cash (which I’m looking to put to work):

US - 46.5%
CDN - 9.5%
Developed - 2.75%
Emerging - 2%
Bonds - 10.75%
Cash - 28.5%

As you can see, I see no issue with going overweight US. I do intend to grow the Canadian portion by buying Canadian dividend paying stocks in my unregistered for tax efficient income. However, that will be with new cash. I will likely grow the emerging. I don’t like Europe or Japan as an investment so I’m not overly interested in developed.
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llpresident wrote: That’s not too far off my current portfolio other then my very small developed markets and more cash (which I’m looking to put to work):

US - 46.5%
CDN - 9.5%
Developed - 2.75%
Emerging - 2%
Bonds - 10.75%
Cash - 28.5%

As you can see, I see no issue with going overweight US. I do intend to grow the Canadian portion by buying Canadian dividend paying stocks in my unregistered for tax efficient income. However, that will be with new cash. I will likely grow the emerging. I don’t like Europe or Japan as an investment so I’m not overly interested in developed.
Glad to hear that! :) Discussed my latest portfolio musings with dear husband. Agreed to:

1) Sell both ZCM and ZIC Bonds ETFs
2) Buy Loblaws in either RRSP (as won’t be adding cash to the non-reg till December)
3) Start buying ZQQ in my new LRSP
4) Add to VTI and IEMG in my RRSP, as planned
5) Don’t add to XEF and no REITs until we get a better idea about their rental losses
6) Don’t rush to deploy cash :)
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Been slowly buying bits and pieces here and there for the last few weeks, and just realized I'm down to 10% deployable cash already. Looks like it's time to sit back and just watch for a while, maybe take some profits in a few spots and wait for the next big dip/drop to invest the rest. My timing was waaaay off for the most part, but I did manage to get about 1% in right near the bottom. Smiling Face With Open Mouth
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@FarmerHarv

Were it not for the news related to GILD, Cdn financials were heading lower, so I'm waiting. https://invst.ly/qhbap

Volatility and the demand for safety in USD has not gone away, https://invst.ly/qhbec

My personal China indicators, Dr. Copper and Thermal Coal (just for observational purposes), are up offsetting some of the negativity, https://invst.ly/qhbhq
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FarmerHarv wrote: My timing was waaaay off for the most part, but I did manage to get about 1% in right near the bottom. Smiling Face With Open Mouth
Me, too! :facepalm: IEMG @$36 (the bottom was $35.65) was my only “bottom catch” Face With Tears Of Joy
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So short of reading all 31 pages, did you manage to get in at the "right time"?
Keep calm and go long
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freilona wrote: Me, too! :facepalm: IEMG @$36 (the bottom was $35.65) was my only “bottom catch” Face With Tears Of Joy
Hah, I'm a liar. Looking back I didn't have a single bottom catch on the 23rd. I was a seller on the 20th and a buyer on the 24th...I thought I had a couple of buys on the Monday but I must've chickened out. No bragging rights at all for being an elite market timer. Smiling Face With Open Mouth And Smiling Eyes
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treva84 wrote: So short of reading all 31 pages, did you manage to get in at the "right time"?
Nope, only @alexcalvado did, as always - the rest of us are still learning from him 🤣

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