bbarberayr

Some indications Vancouver prices have peaked: https://betterdwelling.com/city/vancouver/demand-for-single-family-homes-in-vancouver-drops-over-50/?utm_medium=pushnotification https://betterdwelling.com/city/vancouver/timberrr-vancouver-real-estate-selling-for-less-than-purchase-price/

I agree that prices are going up, so more buyers than sellers, but the broader market interest, from what I read,is in tech, commodities, energy, etc. You would think there'd be more interest in financials. So, for example, if I look at seekingalpha stock followers, you have 11,000 for tech company BRCD, but only 3,000 for pension manager/insurer VOYA, even though VOYA has a larger market cap. Municipal bond insurer, AGO, ($5 billion mkt cap) had 1 analyst ask questions on their conference call this week. Stocks like GS, which is up over 15% in a week, have no comments on this board since June. Just seems that we should be seeing more talking about this and people getting on board with buying.

I've got about 50% of my portfolio in financials spread across life insurers, European financials and regional banks and they continue to kill it today and are amount the best performers of the market. Regional Banks up 20% this month, XLF up 10%, pretty much all of the insurance companies I follow up 20%. Big moves, but they are still among the cheapest stocks in the market and economic factors (less regulation, higher interest rates, improving economy) are moving to their benefit. Yet, there seems to be little interest from people in buying these. Perhaps most are value-oriented investors like me and have been holding for a while waiting for this, or maybe a lot of the faster traders have been burned chasing moves like this the last couple years, but sure seems like an easy place to get outperformance relative to an expensive general market the next couple of years. Am I missing something here or anyone have ideas why things are acting this way? Thanks

When life insurance companies write a policy, they try and match, in aggregate, the corresponding investments. The they just sit on the investment and use it to pay out the claims at the end. This works great if you are selling insurance to older people, but, of course, younger people will live far longer than the longest bonds you can buy. So insurance companies have what they call reinvestment risk that the rates when a bond comes due is lower than the rate on the bond which matures. On the other side, in a rising rate environment, they can reinvest the bond at a higher rate and generate more profits. That is what looks to be happening now. The risk for insurers is that rates rise too quickly, and then new policies, with higher rate assumptions, can be written much more cheaply than the older policies, causing people to cancel and rebuy insurance. The insurer is then stuck with low-rate bonds and will incur a capital loss if forced to sell early. But in general, if you look at the SEC filings, some insurers will tell you their expected yield to maturity on their bond portfolios. They mostly hold corporate bonds, not government, but these yields have gone from the 5.7% range to the 4.1% range, so you can see the hit on earnings, especially when you consider how large the bond portfolio is relative to the equity of the company. Also, the capital gains on their bonds due to falling rates are not recognized by the market and you see them valued on book less AOCI (Accumulated other comprehensive income - this includes capital gains). So, as rates rise, AOCI will fall, but won't affect stock prices much and income from new bonds will rise increasing earnings.

Banks and insurance are still cheap relative to their historical valuations and the market, even after the recent bump. Plus, they've been hated for almost a decade now and have the tailwind of rising rates for reinvestment of bonds or loaning to customers. I see them as a great multi-year hold at this time and would expect many of them to have large gains (doubles, etc) over that period.

Assuming he doesn't disrupt global trade or start a major war or blow up the Federal budget, I would agree. Problem is he never really talked policies, so going to take some time to play out.

Companies like this are probably good short opportunities, but I personally lost a lot of money being too early shorting the US real estate market in 2005/2006 and am hesitant to get involved as it could take longer to play out in Canada than I'd think as well.

Genworth out with earnings - http://investor.genworthmicanada.ca/English/media/news-releases/news-release-details/2016/Genworth-MI-Canada-Inc-Reports-Third-Quarter-2016-Results-Including-Net-Operating-Income-of-93-Million/default.aspx " the Company now expects that portfolio new insurance written in 2017 may decline by approximately 25% to 35% as compared to the normalized run rate after the July 1, 2016 regulatory changes for portfolio insurance" Definitely going to put some pressure on buyers and this will put pressure on prices.

http://www.macleans.ca/economy/economicanalysis/canadas-housing-market-looks-a-lot-like-the-u-s-did-in-2006/ Good Maclean's article summarizing housing in Canada.

Timely WSJ article on this topic: http://www.wsj.com/articles/are-fund-managers-doomed-making-the-case-for-passive-investings-triumph-1476798977

Kind of anecdotal, but seeing more advertising for savings rates these days. https://www.meridiancu.ca/personal-banking/Offers/OOP/1percent.aspx?utm_source=google&utm_medium=cpm&utm_campaign=2016FallDesposit&gclid=CIXz-cOI2M8CFQqqaQodEKMPHQ https://www.eqbank.ca/personal-banking/features-rates?utm_source=google&utm_medium=cpc&utm_campaign=EQB_HISA&gclid=Cj0KEQjw4fy_BRCX7b6rq_WZgI0BEiQAl78nd_yU2s5D64uhiSR2DZzVlFNwNlhQSjNceeQrk1zYO4saAsno8P8HAQ Could be just related to what I've clicked on, but if it is a trend, it is a good indicator that the rate rises we've seen in US treasuries and bonds is flowing through to savers and that is a good sign that the rise in rates is sticking better this time. Any thoughs?

Great web site on XIRR - http://www.financialwisdomforum.org/gummy-stuff/XIRR-stuff.htm I agree you need to do this yourself in a spreadsheet to be accurate and not use the broker sites. In my opinion, XIRR is the best way of doing this.

I think a very problematic scenario is a sudden, unexpected burst in inflation, driven maybe by commodity prices, maybe rising wages, or something else. If we get sudden inflation, it would force interest rates to rise far more rapidly than people are expecting and cause all sorts of problems - government deficits due to higher interest payments, people unable to afford mortgages and losing houses, businesses unable to raise debt or too expensive debt, etc. A slow gradual rise in rates is manageable and pretty much everyone is expecting this, but a sudden burst in inflation and rates would be unexpected and a big problem.

randomep, I wouldn't get so down on the prospects for growth in earnings. We've been working off the financial crisis for a number of years, but things looking forward to look a lot better. Things that are positive include the improving housing market, improving job market and wages, technology innovation, improving economies around the work, etc. Even inflation appears to be going up, which would be good for nominal GDP. Assume we can get to 2.5% inflation and 2.5% GDP growth. That's 5% growth in dollars which flows into company revenues.

Another article showing how Value has been underperforming and due for a turn: http://www.advisorperspectives.com/commentaries/20160818-allianz-global-investors-when-will-value-investing-come-back-around?channel=Income I think discussions like this happen when Value investing is out of fashion like it has been and will be changing soon.

I use the old version as well and have had no issues. I've spent quite q bit of time talking to people at the call center and in tech support about the issues with the new version and they tell me improvements are coming, but taking a long time. Thankfully the old version is still available. It's amazing how companies frequently things worse with their enhancments - Yahoo Finance is one of the worst. Fortunately, they have left the Canadian version alone and I only use that one as well.

I personally don't trust Dundee ever since they did something back in around 2007 which showed me that their interest was in management compensation, not helping customers. What happened is they had a gold fund which held share in multiple companies. They then signed an agreement extending the management contract for several years. A few months later they decided to sell the shares and buy an operating mine and become an operating company, which was fine, but they were also required to pay out the management contract of about $30 million dollars. I immediately sold and have never bought or invested with Dundee since.

All of the Life Insurers are value traps in the current market. Take a look at MET, PRU, etc. or for really cheap, look at the small ones like NWLI or KCLI. They are all at sub-10 p/e's a large discount to book value and tangible book value. They are cheap relative to the market and cheap to where they traded prior to the financial crisis. But they refuse to move unless interest rates move up. Every time we see a hint of rates going up, like today, they jump (eg. MET up 5% today), but they get pushed right back down again if rates fall. When we do see the catalyst of rising interest rates, they will go, but in the meantime, you get to own a business with growing book values, cheap earnings and some dividends,

They used to ask me quite regularly when I called if I had switched to the new web broker and if I wanted to watch an on-line seminar to get educated, but have stopped doing that. They also used to say the old web broker would be going away "soon", but have stopped that as well. Makes me think they are getting a lot of negative feedback and are reworking the new system. One of the other things that is particularly frustrating is the new alert system. In the old system, you could set up generic alerts for all stocks for thing like dividends, etc. and then had the one screen to enter high/low alert amounts. Now each stock alert has to be entered individually, so if I wanted to replicate the old functionality, it would be 8 alerts per stock times 50 stocks or about 400 alerts instead of a couple screens. Needless to say, I've stopped doing alerts.

Since the US Market is closed today and out American friends are probably away having fun... Anyone using the new Webbroker on TD Direct Canada? I've tried it and found it quite lacking, so have given up and gone back to the old Webbroker. Just curious if anyone is using the new Webbroker and is happy with it?

Canadian rates will follow the US, so what the Fed does is important. Most commodities are far off their bottoms - look at oil, gold, base metals. We've had the crash and now we are slowly building. I agree these commodities are product are much lower than a couple of years ago, and these will start feeding into inflation numbers. Unemployment in both Canada and the US is quite low, and we are seeing companies having trouble getting highly skilled labour and also minimum wages rising everywhere. I think this cycle we see a cost/push inflation cycle and this is what the Fed would much prefer over a demand/pull style. I'm sorry, but I think you're way off the mark here. First of all, we're talking about Canada here, so the Fed has nothing to do with this. Second, I don't think we're anywhere near a commodity up cycle. Even then I don't think supply side inflation is what you're looking for to cure these ills. Third, the idea that rising wages are just around the corner is a bit of a fantasy. Even if you would get a bump in wages that won't push inflation up. What you're describing would require a tight labour market and a supply constrained economy and we're pretty far away from both of those. I'm sorry I wish you were right cause then the situation wouldn't be as dire. But it's not the case.

I think inflation is coming. It will help a lot of the issues with the current economy like over-valued real estate and excessive government and other debt. Likely the scenario is inflation rises due to increased costs due to things like rising wages and commodity prices. The fed will be lenient on this as it wants higher wages and employment and prices. Inflation will likely get up towards the 3% area, then the Fed raises rates slowly, allowing inflation to crush the real value of the excess debt. Finally, inflation gets too hot and the Fed raises rates a lot and we get the inevitable recession and bear market.

Was walking near Humber Bay in Toronto on the weekend and lakefront condos were being quoted at over $1,000 per square foot - but I can see people buying. A $1 million mortgage at 2.2% amortized over 25 years is $4,331 per month or about $52,000 per year. But if rates jump back to 5%, which would be considered exceptionally low prior to the financial crisis, that jumps to $70,000 per year. People are certainly looking at numbers like $4,331 and saying "with our 2 good lobs, we can afford that payment". But many people are stretching themselves already to get into the market and not thinking about rate rises, so coming up with an extra $18,000 will be tough to impossible for many. And when rates rise, you will probably see a lot of forced sellers, so prices will have a lot of air under them.

Latest quarterly news out - http://abcfunds.com/wp-content/uploads/2016/04/vol27iss2-web.pdf We will see how the transition he has made turns out - transitions like he is making don't occur in the middle of bull makets, but more likely at the end of bear markets. Makes me think hard-core value and resources could be restaging a renaissance. "Over the past 15 months we have proactively repositioned our five ABC Funds’ portfolios toward the new investment world of ecommerce, mobile technology, healthcare and globalization. It was our sense that profound economic, financial and technological changes would continue to impact the world economies and that investors would have to take notice. Although there has been a price bounce in resource securities, particularly, in the oil & gas, mining, and gold sectors, we have stuck to our “new world investment thesis” whereby liquid technology, healthcare and American financial common shares would be the mainstay of our portfolios. "

"The point is not to imply that an investor won’t be able to pick off an attractive deep value stock from time to time. It is our opinion, however, that generally the purchase quantities will likely be insufficient for most institutional investors, the stock might be an illiquid value trap and/or the stock may lie in the precarious resource sector vulnerable to volatile commodity prices. This situation is the reality of today’s value marketplace. The fact is that pickings are very slim and value investors such as ourselves have had to face a more complicated world of “new value” whereby past parameters of low price/earnings multiples, discount to book value, replacement cost and/or out-of-favour contrarian investments are no longer enough to achieve investment success. A few examples of these new value ABC Funds’ holdings include Apple Inc., Boston Scientific Corporation, Microsoft, Johnson & Johnson, Visa, Amgen Inc., Kraft Heinz Co. and PepsiCo Inc. We believe that these common stocks offer not only good long term value and liquidity but also investment stability, dividends and growth in an extremely volatile financial environment." > The above guy is a long term Canada Value Investor and used to have a great rack record, but now his 10 year record is negative and he is giving up. You saw this in 1998 - 2000 where value guys closed shop, etc. and now with the gap between growth and value near its highest, I wonder if you see history repeating itself, just before value starts working again, like it did in 2000. http://abcfunds.com/media-centre/from-the-desk-of-irwin-michael/april-15-2016/