Welcome to another recap post. Lots happening these days that we’ll get into. First, to quote Game of Thrones: “Winter Is Coming!”
I don’t for a minute think we’ll see the V shaped recovery and there will most likely be lots more pain ahead. Happy thoughts, I know. But we need to prepare because there will be lots of opportunities ahead.
Yes we have much to discuss, but first my disclaimer: this post contains affiliate links where the blog may receive a small commission on any sales from EQ Bank, Scotiabank, Questrade and Tangerine.
Market Have Recovered…Somewhat…
The markets rallied hard off their March lows but I’m betting we’ll be in for more sell-offs in the weeks ahead.
Banks are preparing for a deep recession that could be worse than 2009. It’s looking more and more like the hoped-for V shaped recovery will not materialize as countries struggle to revive their economies.
If you have some extra cash to invest, you may want to wait until another big drop happens. If you think you missed the boat, you didn’t there will be a lot more volatility to come.
I did a lot of buying in March so I’m taking a bit of a break for now.
Instead, I’ve been rebuilding my emergency fund and keeping some cash on the sidelines.
I’ve actually done a bit of selling recently. I sold some of my Fortis (FTS) shares in anticipation of another stock market sell off. I hope to buy back in at a much lower price point.
The 3.5% yield on the stock was not enticing enough for me to stick with it. Don’t get me wrong, Fortis is a long term holding for me and has an amazing track record of dividend growth. But I’m playing the short term game now.
I’ve also made a bit of cash buying and selling some bank stocks like CIBC and Royal Bank. Again, both are long term holdings of mine that I own across a number of accounts so I can sell and buy back in a little bit.
This market is presenting lots of opportunities and volatility is the investors friend. Now I’m not afraid of getting caught with any of these stocks because, like I said, they are long term holdings and they offer great value now and especially if they go lower.
This Market is Flying on a Wing and a Prayer
Frankly, I don’t get what the big stock rebound was all about. Yes, our worst fears probably won’t happen but a return to normal will take lots of time. And consumers and companies can only stay solvent for so long.
There is also the slow creep of the impending financial crisis that has yet to materialize. Since 2009, the world has accumulated trillions and trillions of dollars of debt. Global debt was already at record highs before all of the Coronavirus bailouts were handed out.
There’s a sense among politicians and economists that all of this stimulus HAS to work; otherwise we sink into the abyss.
There will be a ton of bad loans, credit card debts, mortgages etc. This will put lots of pressure on the financial system.
That’s why I’m waiting for the next big drop to do more buying. I’m taking the wait and see approach.
Now I’m not saying sell all your stocks, I am saying keep a bit of cash on side and buy in when another market sell off happens.
The Run on Physical Gold
I rarely ever talk about gold, but I’ll mention a bit now because what’s happening in the gold market is crazy.
The price of gold is soaring for a few reasons mainly because of the money printing that has been going on since the Great Recession and the trillions in bailouts due to the coronavirus.
People see it as a store of value in uncertain times because it holds up well in periods of inflation and even deflation.
As an investment in the traditional sense it’s not really all that great; unless you have the best luck and are able to perfectly time the gold market…good luck with that!
But as I’ve mentioned before on this site, I do own gold and from time to time I add to my relatively meager holdings.
Now I’m not what you would call a “stacker” (someone that regularly buys physical gold coins and bars), but as a result of my coin collection I actually own several ounces of gold and hundreds of ounces of silver.
Some of these are pure gold and silver bullion and some are proof quality collectible coins.
The more financial crises that I see over my life, the more I think I’m beginning to understand the importance of a precious metal component for large investment portfolios.
Once gold prices in particular drop, I think I’ll buy a few more ounces as a portfolio insurance policy.
There was a run on physical gold recently because many gold refiners actually shutdown because of the coronavirus. That’s left a lot of people scrambling to get the real deal.
Years ago I wrote a piece called Investing in Physical Gold. I said if you want to own gold the best way is to own the physical metal for a variety of reasons. But one of them was that when sh*t hits the fan, you want to be able to have access to the real thing. Paper gold is not insurance in periods of financial stress.
Given the amount of debt sloshing around the world today, I think owning a little bit of gold is prudent.
How I Manage My Money
In case you’re wondering here’s where I park my money and some financial services that I use:
For my Daily banking and no-fee cash back credit card I use Tangerine. Curious? Check out my Tangerine vs Simplii Financial review and the Tangerine Money Back Credit Card Review.
For my Savings I use the EQ Bank Savings Plus Account. Never heard of it? Click the link to check out my EQ Bank Savings Plus Account Review.
For investing I use a combination of TD Waterhouse (for legacy investments) and Questrade (low cost stock purchases and free ETF purchases). If you haven’t done so already, check out my Questrade Review to see why it’s the best deal around. Get $50 in Free Trades when you signup for Questrade through this link.