Welcome To The Depression...

[Gary Ruben]

Re: Welcome To The Depression...

Several of my picks have done well but overall results have been limited due to the swine flu. Notably SW ( great earnings ), RIM ( stopped flat lining at $80-83 cdn ), BBD.B ( largest volume on the TSE Thursday ), and QUA ( busted through a key $7 resistance level ).

On the downside the Canadian banks clearly hit the skids for a week. Caution is the word on these stocks short term. Gold mining stocks were also surprisingly mediocre last week as a group usually on a crisis gold takes a spike up not down. Shows you how unpredictable markets can be.

I'm not very good at figuring out when to sell stocks so I pretty much have to get dividends from those I buy to keep, which is most of them. I could never buy a stock in a company which makes a lot of money and doesn't pay a dividend. I'm not going to pay people executive sized salaries and stock options, as a shareholder, and not get a dividend in return. Most of what I buy has dividends.

The banks are an interesting proposition. The Canadian banks seem to pay a nice dividend. I think they were on hold the last week awaiting the stess tests of banks in the U.S. I think the results are due out some time later next week and we probably already know which ones will do the worst.

The financial index ETF's track more than the banks. In Canada the index had a 52 week high of around 201. It's currentlly around 136. The idea is to wait until the index gets as high as I think it will go and sell the ETF. I don't care about the value of the ETF. Only the point at which I bought the index and the point in which I think it will be time to sell the index (and ETF).

The US index has a couple of hundred companies or more, from what I understand. I don't know if the banks make up even 50% of the weighting of the index, but maybe they do. In 2007 the index was at around 600. When I bought the ETF, the index was just under 200. I'd like to see the index at least 300 before I sell the ETF. I have no idea what the ETF will be when the index reaches that point, but that doesn't matter to me. The NAV is dictated by the index. That U.S. ETF pays a dividend, I think. Actually, I'm thinking the bank stress tests won't be too bad, or at least not as bad as expected.

I don't know how high you expect gold to get. I don't see much inflation. In fact, real estate has been coming down. A real problem is when the price of gold goes up it seems to cause demand destruction. At least that's my observation.

[Duncan Smith]

Re: Welcome To The Depression...

Interesting week I made a lot of money on BBD.B and BMO short term options, but gave a portion back on poor performance of technology stocks. Mining continues to supplement my balance almost every week. Not all market moves are logical right now; for example BMO is either overbought or TD is oversold depending on your perspective.

I like gold companies early in the week. Gold prices are climbing again; it doesn't matter if they go higher as long as the price holds above $900 ( the weak US dollar seems to be insuring this short term ). The banks offer excellent opportunity for movement either way ( possibly betting both directions is smart on option expiry week ). For those who don't mind some risks the Canadian options market seems to be a continued great opportunity as many options are underpriced at times due to the constant negativity in the press about the markets. I believe the US market deserves this scrutiny ( to a degree; mostly banks and car companies ) but most Canadian businesses are doing well.

My recent experience has been whatever looks really bad one week tends to rebound the next. If this maintains, technology should rebound and high fliers like BMO may correct on at least one day. Long term investors the banking blips don't matter really but I think technology has some good opportunities buying on these dips.

Invest at your own discretion but I love this market :).

[Gary Ruben]

Re: Welcome To The Depression...

Invest at your own discretion but I love this market :).

I love this market as well! I'd logged in to write my comments for this week so I'll include them in my reply to you.

I sold the last of my Motor Companies yesterday. My thought is they are ahead of themselves and there is a price at which I'd buy them back. If they reach that price I'll have the stock back and money from the previous sale. If they don't reach that price all I'll have is money.

GM did not put out a very encouraging quarterly report. Lost a lot of money and burned a lot of cash for the quarter. Our government wants the union to give more concessions. They did that at Chrysler and I notice they are also shut down by the bankruptcy in the U.S. No supplier confidence.

Our government is talking about liquidation at GM if the union does not give concessions. Can't tell if that's a bluff or a miscalculation. They will lose the tax base on the auto workers and parts companies. Less energy will be used for production (they use an awesome amount of energy) so Western Canada and the tax income from the energy will be less. Trucking will be hurt considering the amount of parts and supplies trucked into the plants, not to mention the vehicles trucked out. I could go on but won't.

You might recall last weekend I wrote that I had bought shares in the U.S. Proshares financial 2X ETF. That and my Canadian Financial ETF are working out OK. That U.S. ETF is up almost 40% on the week. News of the banks stress test were leaking out all week and driving the financials up. However, the week before, I read something which tipped me off on the results. Not the individual results but the overall trend and health of the banks. There was no point in analysing the outcome and not making money on it. The U.S. financial index DJUSFN has been decimated. It hit a high in 2007 of just over 600. Now the index is down to around 231. A patient investor like myself should be able to work this one for a nice gain. A downward correction would not surprise me but I normally ride those out unless I'm particularly quick.

I bought a company in the U.S. yesterday. I'd promised myself to stay away from oil and gas because that has cost me the most grief over the years. I just couldn't do it and bought on a poor earning report and subsequent drop of 30%. They didn't lose money but made less than the analysts projected. I like what they do.

They work on blowouts and that kind of thing around the world. Some 35 years ago I worked on a couple of those. I particularly recall one. A farmer was digging in his field and hit a buried high pressure large size pipe. Punched a hole in it. You should have heard the noise coming from that one. I'm sure the seat of his backhoe is still brown. Anyhow, with that kind of pressure you don't have to dig to get at the pipe. It kind of digs its own hole from the escaping pressure. We had to fix that one without turning it off.

I think anyone who has ever worked on one of those and hasn't felt the thrill and "rush" of excitement of the situation doesn't have a pulse.

Regarding BMO, which you mentioned, I think I read RBC put a target price of 62 on it. Just looking at the current price and dividend yield in this environment makes me think it's currently trading for chump change.

I only sell when I think the price on a company has gotten a bit ahead of itself and then try to go into something which is not properly valued. It minimizes the losses when I make a mistake - which I do. I seem to be buying a lot in the U.S. The companies there have been beaten down so badly it looks like the land of milk and honey. Particularly some of their small cap stocks.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Hugh Brodie]

Re: Welcome To The Depression...

The latest from me:

X.TO: sold out my remainign holdings at 33. It was in freefall and ended that day at 31. Current price: 31.29.

HFU.TO: Still holding. Friday close was 7.54.

TCK-B.TO: holding on to the rest. Friday close was 16.60 (triple what I paid for it 7-8 weeks ago).

XRE.TO: (Ishares REIT - sort of a mutual fund of REITs). Bought at 7.50 about 2 weeks ago. Friday close was 8.63.

SCU_UN.TO: (Second Cup trust units). Bought last week at 5.11. Friday close was 4.99. Rumour is that the majority shareholder wants to take the company private. In the meantime, I'll collect the distributions ($1.123 in 2008; $0.265 for the first 3 months of 2009 - 18.5% yield even at the reduced 2009 rate).

[Gary Ruben]

Re: Welcome To The Depression...

The latest from me:

X.TO: sold out my remainign holdings at 33. It was in freefall and ended that day at 31. Current price: 31.29.

HFU.TO: Still holding. Friday close was 7.54.

TCK-B.TO: holding on to the rest. Friday close was 16.60 (triple what I paid for it 7-8 weeks ago).

XRE.TO: (Ishares REIT - sort of a mutual fund of REITs). Bought at 7.50 about 2 weeks ago. Friday close was 8.63.

SCU_UN.TO: (Second Cup trust units). Bought last week at 5.11. Friday close was 4.99. Rumour is that the majority shareholder wants to take the company private. In the meantime, I'll collect the distributions ($1.123 in 2008; $0.265 for the first 3 months of 2009 - 18.5% yield even at the reduced 2009 rate).

Hi Hugh,

I'm also still holding all the HFU I bought. I seem to recall we both got it within a few cents of each other. The index it tracks just crossed its 50 day moving average on the way up so I'm watching it closely.

XRE is one I seriously looked at. According to their web site their top holding is Riocan Real Estate Investment Fund. As of May 8th (their web site date) it has a 23.22% weighting. I thought it is was a decent investment and seems to pay a dividend as well. I like dividends because they buy groceries. :)

I think your selling half of TCK-B after it doubled was a professional thing to do. You locked in a profit and the remainder is being "played" with market money.

I never look back on stock prices after I sell them. Most of mine keep going and looking back would stress me more than losing a 2 year correspondence chess game with a simple blunder. :) I always keep a couple of losing stocks around to keep me humble.

This all comes with my usual disclaimer. I'm an amateur and this is kind of a hobby. The money markets gives me a chance to use what I've learned in the work world over the years and validates my having taken a Child Psychology course in my student days.

Anyhow, my wife went to church this morning and I put an extra $10. in her collection plate envelope. It's been a good week and I am thankful.

[Craig Sadler]

Re: Welcome To The Depression...

isn't something like XRE over-diversifying just for the sake of diversifying? if Riocan is 23% of the ETF, why not just buy Riocan, and enter their DRIP and get a 3% discount on dividends repurchased?

http://www.cibcmellon.com/Contents/e..._Estate_I.html

[Gary Ruben]

Re: Welcome To The Depression...

isn't something like XRE over-diversifying just for the sake of diversifying? if Riocan is 23% of the ETF, why not just buy Riocan, and enter their DRIP and get a 3% discount on dividends repurchased?

XRE tracks the S&P/TSX Capped REIT Index. I think there are 11 Reits on that index. XRE contains the index Reits so the diversification seems correct. There should be no "if" to the weighting of Riocan. I pulled it off the Ishares website and assume it to be correct as of that date.

If the price of Riocan drops or stays the same and others on the index rise, the weightings will probably change.

I don't enter DRIP plans because I don't like odd lots. I assume if the distributions are considered "other income" it has to be filed as that, and tax paid. Chartwell Seniors Reit, which I hold and is on that index, paid last years monthly distribution as "return on capital", which is treated differently.

This comes with my usual disclaimer to consult a financial advisor.

[Gary Ruben]

Re: Welcome To The Depression...

This week we are seeing more auto company anguish. Many auto dealerships have, or will, receive notice they will cease to be dealerships.

The GM truck plant in Canada will no longer be producing trucks from what I've been hearing on TV. The GM workers are once again being asked to make concessions.

One thing I've learned over the years is sometimes a person has to take a stand and say "no". If it doesn't work out then look for a new job. If the government wants GM to have cheaper labour then let the government subsidize those auto makers for the difference between the wages and the cuts wanted. This economic mess is not the fault of the workers from whom taxes are extracted.

Regarding dealerships, the one where I bought my car changed from a Chrysler dealership to a Mitsubishi dealership a few years ago. The still repaired Chryslers and did oil changes and that sort of thing so it didn't bother me too much. Then I needed some warranty work done on the car. I was told I would have to take it to a Chrysler dealership for warranty work. The place where I bought the car could fix it but would have to charge me. Since they were no longer a Chrysler dealership they could no longer do warranty work and be reimbursed by Chrysler.

Today, if I were to need a car, I would buy a "beater" car until the situation is cleared up. Then I would look to an automaker who had survived this current downturn and whose cars would have a decent resale value after a few years. I sure wouldn't be buying from a company which had gone through bankruptcy.

The stock market hasn't been much this week. I picked up shares of a trucking company on the NASDAQ which had turned in a bad quarterly report and had become real cheap. Something called Pacer International. I figure they will turn it around by the third quarter and be back making money by then. It cost me less then $3. a share and I'll pick up more if it gets under $2. In good times this one has traded at between 20 and 30 dollars but these aren't good times and when they drop that much I guess they can go to Zero.

I haven't been buying much on the Canadian exchanges recently. Lack of confidence.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Gary Ruben]

Re: Welcome To The Depression...

I guess I'll get to see if my Chrysler can be repaired. The engine light went on today and it needs service. Why does this always happen to me on a weekend?

I don't know if any of you have seen the latest Conservative attack ads against Ignatieff. I find them particularly offensive. The ads also seem to be be derogatory toward the U.S. I am of the impression Ignatieff was born in Canada which makes the attacks even more odd.

We don't have to go back very long to find one of our Prime Ministers who was not born in Canada. Possibly many of you think we have to go back to 1894 when MacKenzie Bowell was Prime Minister and was born in Suffolk England. We have had 4 Prime Ministers who were not born in Canada. Two were born in England and two were born in Scotland.

Our last Prime Minister we had who was not born in Canada was John Turner in 1994. He was born in Surrey, England.

The questionable issues being highlighted in the nasty Conservative attack ads are a non starter. Particulary considering how the Americans conducted their presidential election.

[Hugh Brodie]

Re: Welcome To The Depression...

We don't have to go back very long to find one of our Prime Ministers who was not born in Canada. Possibly many of you think we have to go back to 1894 when MacKenzie Bowell was Prime Minister and was born in Suffolk England. We have had 4 Prime Ministers who were not born in Canada. Two were born in England and two were born in Scotland.

Our last Prime Minister we had who was not born in Canada was John Turner in 1994. He was born in Surrey, England.

This reminds me of another similar trivia question:

Q: Who was the last premier of Quebec not born in Quebec?

A: René Levesque. He was born in Campbellton, NB - since there was no hospital in his family's hometown of New Carlisle, Quebec.

[Gary Ruben]

Re: Welcome To The Depression...

When I first stated this discussion last Sept. 15th, who would have thought we would be discussing the bankruptcy of Chrysler and the current situtation of General Motors. One which finds it so close to bankruptcy. Now we can only wait to see if General Motors will transform itself into Government Motors.

I feel for the bond holders of GM. So many moms and pops who bought GM bonds and now are being made out to be the bad guys by the U.S. government. The reasoning seems to go that if people hadn't bought the bonds and allowed the company to continue, the company would not be in its current condition.

They aren't kidding me. A company the size of GM which can't make the interest payments on their bonds shouldn't be in business. The bondholders should get the assets and not the government which only made the matter worse by tossing more money at that company.

The problem with Government Motors is if people will want to buy autos built by civil servants.

I got my Chrysler fixed last week. No problem. They replaced the part. While I was in the dealership I got behind the wheel of an Avenger for a look see. The hardness of the seat distracted me from checking out other things. I like car seats a little softer and for me not liking the seat of a car is a deal breaker. Not that I would have bought it in any case. My car doesn't have many miles on it.

This week I got a recall. Not on my car. On my pacemaker. No kidding. The problem is completely random and there is no test which will predict which ones of that model and year will fail. I hope the doctor sews me up neatly like last time when he's finished.

I notice oil prices have been going up and with it the price of gasoline. Personally, I can't imagine the increase in gasoline prices will help the economy or the sale of autos. Maybe hurt the tourist industry.

Natural gas prices are getting low. Oil is 18 times the price of natural gas today. To convert from natural gas to oil (barrels of oil equivalent) I think they are using 6. 6 MCF (thousand cu. ft) for 1 barrel of oil. So it looks like there is a disconnect here. I have a price in mind on natural gas where I will go long on the commodity with an ETF. It hasn't hit that price yet and might never.

The Dow Index has been going sideways for the past month or so.

I notice in todays newspaper our national deficit will be more than 50 Billion dollars this year. It seems like only yesterday that finance minister said he wouldn't be running deficit. Now it will be the largest in Canadian history.

As chessplayer know, the best defence is a good offence. PM Harper seems to be defending all this with attack ads which suggest the leader of the opposition is not what his party considers an approved Canadian. He didn't spend all his working years in Canada.

I'm not sure of the message the Conservatives are sending. To me it seems they are saying if you weren't born and raised in Canada and spent all your working years here, you aren't a Canadian worthy of leading a political party.

To me that sounds "redneck" and I'd never vote for a political party advoctating such a thing.

DISCLAIMER: None of what I write should be used for investment decisions. I write this stuff for entertainment. Consult a financial advisor.

[Ben Daswani]

Re: Welcome To The Depression...

Okay, fine, the recession exists now.

[Gary Ruben]

Re: Welcome To The Depression...

Okay, fine, the recession exists now.

Analysing this stuff is like analysing your chess game. You have to see the stuff before it happens.

What do you think will happen next?

[Tom O'Donnell]

Re: Welcome To The Depression...

When I first stated this discussion last Sept. 15th, who would have thought we would be discussing the bankruptcy of Chrysler and the current situtation of General Motors. One which finds it so close to bankruptcy. Now we can only wait to see if General Motors will transform itself into Government Motors.

None of that surprises me in the least. The only surprising thing is that it is taking so long. The quicker losers like GM and Chrysler are buried the better.

I feel for the bond holders of GM. So many moms and pops who bought GM bonds and now are being made out to be the bad guys by the U.S. government. The reasoning seems to go that if people hadn't bought the bonds and allowed the company to continue, the company would not be in its current condition.

They aren't kidding me. A company the size of GM which can't make the interest payments on their bonds shouldn't be in business. The bondholders should get the assets and not the government which only made the matter worse by tossing more money at that company.

These bailout packages are a huge scam. Keeping zombie companies "alive" with taxpayer money is criminal. Any politician who thinks this is a good idea should lose their job pronto. Why should my tax dollars go to subsidizing other people's jobs and lifestyle choices? No one said you are guaranteed a four-bedroom, two-and-a-half bathroom house with a two-car garage and all the crap you can fit into it (and your own storage unit besides).

I notice oil prices have been going up and with it the price of gasoline. Personally, I can't imagine the increase in gasoline prices will help the economy or the sale of autos. Maybe hurt the tourist industry.

My prediction:

As the recession is ending, oil prices will skyrocket again. Economy will hum along for a while. Continuously high oil prices will cause another recession. This will happen over and over, with ever-increasingly higher prices for oil, followed by recession after recession. People will complain, some will change their behaviours, but mostly people will rail against conglomerates like BP and ExxonMobil yet still drive to the corner store in their SUVs and wonder "gee why isn't anyone out there looking for more oil to consume?"

People shouldn't be worrying about tourism. That's destined to be a thing of the past. We are presently living in the golden age of travel. In 20 years' time I expect the price of air travel to be so expensive almost no one will be able to afford it. My recommendation: if there is somewhere you always wanted to go by air, and you have the money, GO SOON.

I notice in todays newspaper our national deficit will be more than 50 Billion dollars this year. It seems like only yesterday that finance minister said he wouldn't be running deficit. Now it will be the largest in Canadian history.

As long as the politicians look at these individual happenings in isolation, I expect that we are going to see more deficit spending. I personally worry about the day that countries like China decide that they don't want to prop up the high-consumption lifestyles of the typical North American and pull the plug.

As for the ramblings of political party X or Y, it is all pretty meaningless. I wish some politician would stand up and say:

"People of Canada: we are screwed. We acted like teenagers partying on the weekend while the parents were away. That time is over. Time to get serious."

But that can't happen because heaven forbid that anyone get the news that the future is going to mean buying less junk no matter who is in charge.

[Tom O'Donnell]

Re: Welcome To The Depression...

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