cwericb

"Sooner or later Joe six wont invest in the markets." You hit the nail on the head there and that's one of the things that concerns me. If markets keep beating up the little guy and the media keep sensationalizing market losses (and rarely mention gains) than the those small investors are going to get gunshy and look for safer, more predictable investments. If they stay away from the markets it will at best delay recovery and at worst depress overall demand, ie prices, for shares.

Man its hard watching all those gains just evaporate like that and I agree that before long we are going to see a thin bounce, but I doubt that the 'buying opportunities" are over. However I hope ericopoly is right. I wonder if todays action was really because of the downgrade or simply a continuation of the concerns over the general debt problems in Europe and the US? I know that the sensationalism of the news coverage certainly hasn't helped because its certainly scaring the small investors out there. I would suspect that the markets might stabalize a lot quicker if something more newsworthy comes around.

"I have 10% cash and wont buy until it settles down." I agree with this (I just wish I had the 10% cash). But does anyone think that these prices are going to bounce back up right away? I hope I am wrong, but I would be very surprised to see a rebound in prices anytime soon. These plunges tend to feed upon themselves until they exhaust the market so I would be inclined to wait for a while before I buy anything. Just because something dropped 20% in the last week or so doesn't mean that it won't drop another 10-20% over the next year/month/week. Does anyone relly think that we are at or near the bottom here and the drop is over?

Munger, with all due respect there is really no such thing as unsecured loans (assets). Some loans are secured by physical property others by a signature. As per my previous example, would you rather have the doctor's loan on your books or the teenager's? Am I wrong that you are making the assumption that at some point all unsecured loans will default? In actual fact I would not be surprised if the default ratio on unsecured loans was actually lower than that of secured loans.

Re unsecured credit. Okay, quick reality check. I have worked in various aspects of the credit field for a long time, so here are some things you shouldn't overlook. 1) If you have ever tried to get an unsecured loan you will know that: a) Banks just don't give away money b) Banks get a higher interest rate on unsecured loans c) Those who qualify for an unsecured loan are much more financially secure than those who's loans have to be secured. 2) Secured loans are often little safer than unsecured loans. If someone defaults and the security is repossesed several factors come into play: a) The security has often depreciated to the point where it has little value b) The costs of repossession, storage, advertising and sale usually often eat up much of the value of the security. c) In my experience I have often seen banks over estimate the value of the security so the banker can write the paper. d) Most repossessions sell for a severly depreciated value - at the best of times. e) In a seriously depressed market there are few buyers for the security. I have seen times when all sorts of property has been repossesed and had to be maintained by the bank or repossers to the point where it actually cost more than the equity was worth. In the example I used previously: Which would you rather have a) $10,000 line of credit to a doctor secured only by his signature or b) a loan to a teenager for a 5 year old mustang?

Munger you are making suppositions that are not correct. Much of that unsecured credit would involves line of credit to individuals who are relatively secure in their finances. As for being no recourse, again that is also not quite correct. If you are under that illusion, try defaulting on an unsecured loan and see what happens. Also, no secured or unsecured portfolio of loans is 100% collectable. However to suggest that unsecured loans are uncollectable is simply incorrect. Yes, in times of stress the loss rate will increase on both types, but do not overlook the fact that in times of stress the security taken on loans often has little value.

Hey Josh4580, you get what you pay for :)

Sorry Munger, it seems that you probably have no experience with unsecured lending and have difficulty in grasping the concept. While no one said it should be valued at the same rate as secured credit, I can assure you that it is a long way from "complete air". If you actually feel that unsecured credit is essentially unrecoverable I would strongly advise you to keep that opinion to yourself the next time you speak to your banker about a line of credit.

"Unsecured lending is complete air." As someone who deals daily with unsecured lending your comment really is complete hot air.

“The asset behind unsecured lending is complete air.” Sorry but I have trouble letting that pass without comment. Unsecured credit may be less of an asset on a percentage of the credit written as compared to secured credit. However the lending criteria imposes higher requirements on the unsecured borrower. In other words the borrower must have a greater ability to pay than with a secured loan. For example, I would rather have a doctor owe me $10,000 unsecured than the kid out of school who borrows $10,000 to buy a second hand car. Dismissing unsecured loans is to overlook the higher borrowing standards as well as the fact that there are legal means to recover defaults.

Thanks for your thoughts Viking. If it were not for China/Asia I would be very pessimistic. There is an interesting interview with Peter Munk (Barrick Gold) in MacLean’s magazine on mining where he says... “I believe that it is inevitable that over the next two decades those 300 to 400 million Chinese who live in the same homesteads and same conditions as their grandparents on $3 a week, unless those guys are given a chance to either emigrate to cities—which is impossible because the cities are all overloaded—so the only alternative to keep them gainfully employed and give them a chance to improve is to move industry in there. Every factory needs power. The moment you have power, you need roads, you need railroads, you need proper transportation to take the raw material to them and take the finished goods away. The amount of infrastructure needed just in power generation and distribution is equal to the whole wiring system of the U.S., which is copper. To build buildings for the factories requires steel, to build roads you require cement, and all that needs energy, which is coal. So if you add it up, whether it’s zinc or lead or rare earth or agricultural potash to feed them, it’s all mining.” http://www2.macleans.ca/2011/07/27/on-immigrant-dreams-the-importance-of-failure-and-why-the-future-belongs-to-canada/ Regarding BRK, I have been satisfied with FFH but I think that I may have to look closer at BRK.

"not following politics, or economics hasn't negatively impacted many people's lives" Is that not perhaps the problem? Apathy towards government is why we get the government we deserve. Then again, I don't have much faith in the average voter who will vote for whatever politician will promise them the most despite the long range cost.

The world economy is in a mess. As most people here know we've been heading this way for years, but the sad truth is that most people still have no clue as to the reality of the situation - nor do they care. The only bright spot I can see is the tremendous pent up demand in Asia. So my question is this. There is little any of us can do about this on the macro scale, so what do we do to protect ourselves as individual investors? Any suggestions? Say what you like about gold, etc, but I have been invested in RBC Precious Metals Fund for the past 6-7 years and have no complaints, but I was caught off guard when it tumbled in 2008-9, just when I thought it would move in the opposite direction. Lately I have been moving a bit into dividend stocks like FTR but that's no guarantee. FFH Has just been given an upgrade by Cormack today, but I already a fair amount there. Never mind politics, what are you guys looking at for investment for the next few years? Sorry, but this seems to be more or less covered under "How much of your portfolio is in cash?" So just ignore this post if you wish.

Nobody knows. We can be optimistic or pessimistic but we can only guess. Even the greatest minds can be wrong - who would have predicted what happened in 2001? I usually stay fully invested. When the a$$ drops out its hard on the stomach and hard to sleep. But if you get out, when do you get back in? I have been caught on both sides of this over the years. Sometimes you can take a reasonable guess at how things will work out in the near future - for instance there are some prices that are starting to look attractive due to the children playing in Washington. One hopes that the markets will have a little bounce when that settles. Of course the question presupposes that the world economy will become healthy again, but we have to think that way don't we?

On the subject of being depressed and being in a philosophical mood ... Two snowballs. Corruption. Greed. Power. They coalesce into governments that eventually become so dysfunctional they are no longer a viable entity. Does it reach a tipping point where it collapses and we have to start over? The world economy seems to be a house of cards built upon a necessity of ever increasing demand which in turn inspires ever increasing debt. Do we eventually reach a saturation point where the house of cards will fall?

"Perhaps Obama should threaten to sell the gold in Ft Knox to pay the bills that would get the attention of the ideologues and force a compromise." That was mentioned in the news yesterday that they were thinking of that as an option.

Does anyone think those children in Washington have a clue about the effect they are going to have on people's savings and retirement funds? This is not 20 years ago when most people just kept their savings in the bank accounts and GIC's. Today much of that money is invested in the market and providing the stimulus for corporations to expand and hire workers. That in turn generates revenue and thereby taxes. I wonder how much capital gain tax is lost for every hundred points the market loses? I could develop this into a full blown rant but I would probably just be preaching to the converted...

At least if nothing else a 3 cent rise was welcome on a day the TSX was down 268 points.

On the subject of people being out to lunch. Perhaps if we all went out to lunch at the same time maybe we could provoke some sort of settlement with those clowns in Washington because the TSX is starting to get depressing and I really don’t want to go back to 2008 again.

Pulp prices have only softened about 1% yet are still at a higher than at any time prior to the first of June. While the Canadian dollar has been bouncing around due to the US fiasco, up until now has been reasonably stable. So all in all, not much has really changed since the first of the Summer. HOWEVER, for most of April and May the share price was nearly 50% higher than it is today running in the $1.50-1.60 range. So are investors just getting impatient and looking for greener pastures? I just have this uncomfortable feeling that management might be thinking of something that they see as a good long term move, while investors aren't prepared to wait around. I might consider buying more at this level but I probably have enough irons in this fire already.

Richard Chandler boosted his stake in Sino by 50% yesterday to 15% of the company. I believe their average price was $7.30 for yesterday's buy. TORONTO,July 27 (Reuters) - A large Singapore-based fund has increased its stake to nearly 15 percent in Chinese forestry company Sino-Forest , which has been accused of fraud, sending Sino-Forest shares higher in early trading on Wednesday. The Mandolin Fund, run by New Zealand-born billionaire Richard Chandler,disclosed on Wednesday that it bought more than 5.3 million shares of Sino-Forest on July 26. PS. It is rather surprising to see that TRE has probably been the safest place to be as the markets have tanked over the past few days.

Wish I had bought more! True story. Last week I was getting ready to put in a buy order in the $3.60 range. Then I got caught up in posting to this board, forgot to put the order in, went to lunch and when I remembered I hadn't put the buy order in the price was well over $4.00 so I decided I would wait to see if it slipped back again. That $4.00 looked pretty good today when TRE was in the $7.50 range. C'est la vie.

Was that Prunes or Doctor Faustus?

Should this be required reading for everyone on this board? At worst it is entertaining, at best it is downright depressing and scary. I would tend to dismiss much of it IF I was not familiar with the whold FFH story. The fact that Deep Capture has not been sued only lends credibility to their claims. When you make public accusations naming names, giving specific dates, and details you would think that the ‘victims’ would not hesitate to take legal action to defend their reputations. After all we are talking about the most litigious nation in the world and these guys are no strangers to the courts. Just today we see another attempt to sue Fairfax once again with another seemingly frivolous lawsuit to distract from the main lawsuit. Is it just unfortunate that the mainstream media have not done stories on Deep Capture as well as the accusations they make. Or then again, is that simply more evidence of what Deep Capture is saying?

MONTREAL, July 25, 2011 /CNW Telbec/ - Fibrek (TSX: FBK) will release its 2011 second quarter results after market hours on Wednesday, August 3, 2011. President and Chief Executive Officer, Pierre Gabriel Côté, and Patsie Ducharme, Vice President and Chief Financial Officer, will host a conference call on Thursday, August 4, 2011 at 10:00 a.m. (Eastern Time) to discuss financial results. Members of the financial community will be able to access the conference call and ask questions.